The analysis team at Danske Bank explains that while they continue to see further upside for 10Y German Bund yields on a 12M horizon, they expect no major changes in 2017 and this is also the case for Swedish, Danish and Norwegian yields.
“We do not expect the market to price an ECB tapering premium before 2018, as continued low inflation and a slightly less strong growth outlook are removing the need for tighter ECB monetary policy. We also expect the ECB to prolong its purchase programme into 2018.”
“In the US market, not only Fed hikes but also a possible change in the Fed’s reinvestment policy will set the direction for yields. We see slightly higher US yields on a six-month horizon but again higher yields are mainly a 2018 story.”
“We expect the 10Y Bund yield to rise to 0.80% and a 10Y US Treasury yield of 2.8% on a 12-month horizon.”