Eurozone – Further easing expected

Eurozone – Further easing expected

The Eurozone markets are anticipating that the European Central Bank (ECB) will increase the Quantitative Easing (QE) program in 2017. This has led to the European debt market interest rates continuing to fall into negative territory with 40% of all Eurozone government debt now offering investors NEGATIVE interest rates.

We anticipate that the QE will continue into 2016, and potentially into 2017, as the Eurozone continues the slow grind out of recession. Once the ECB ceases the QE this will leave only Japan underwriting the excessively high asset prices around the world, which will lead to more uncertainty around the sustainability of prices, and we will be watching all markets with an increased level of concern

Chart 1 – Who’s still doing QE?

QE

Source: BoE, DB Global Markets Research

Chart 2 – Negative Yields on Euro Gov

Yield

Source: Jack Di-Liza, Bloomberg Finance LP, DB Research