EU recovery fund proposal “short-circuits” euro zone bond yields – Goldman Sachs

Dhwani Mehta FXStreet

According to the Goldman Sachs analysts, the French and German proposed joint EUR500 billion ($547 billion) recovery fund will "short-circuit" Eurozone government bond yields for now and fuel a sharp drop in Italian and Spanish borrowing costs.

Key quotes

“The gap between German and Italian 10-year government bond yields should narrow to below 180 basis points, levels that were last traded in March.

The difference between German and Spanish yields should drop to sub 90 basis points from current levels of 121 bps.”

Market reaction

Amid a firmer start to the European equities and tumbling European bond yields, EUR/USD consolidates the upside below 1.0950. Broad dollar weakness amid risk-on adds to the upbeat tone around the spot.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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