Germany Falls under the Investor Spot Light

By Premier Pension Solutions SL - Thu 24th Nov 2011

 

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The UK and Germany have been seen as the safer havens in Europe since the debt crisis begun. The UK, because of its isolation from the Euro; Germany because of the strength and dominance of its economy within in the euro zone. Government bond yields have reflected this with the UK and German ten-year bonds yielding around 2% whilst every other country nearer 4% and above.

However yesterday, Germany suffered one of its worst debt sales since the formation of the single currency, as investors bulked at the lowly yield on offer given the perception that Germany may not be as insulated as initially thought.

Such news forces one to speculate that should Germany succumb to further risk speculation, the UK could follow potentially taking the sheen off the UK Gilt market, one of the few positive performing asset classes this year. Indeed with the BoE now unsure about their falling-inflation forecast, gilt prices may start to come under some pressure and yields may rise again.