The government bonds of Europe and the US have fallen a lot of price in the final part of 2024 and at the beginning of 2025. What is therefore to be expected for the remaining part of the year? Is it appropriate to shop at low prices and what in Italy?
First of all, it is worth mentioning a technical consideration referring to the period in question: usually, following the closure of the financial year that takes place for many brokers and operators especially American towards the end of November, classically with the Thanksgiving Day, the market phase ranging from about mid -December to about mid -January following is characterized by a high level of speculative volatility; As regards 2024, note that the good bond performances of the year has already been accumulated since 2023 may have also induced many assets to profit -made sockets after mid -December.
Monetary policy in the United States
However, the last annual meeting of the Federal Reserve was held in the USA in those days, considered Hawkish by the professionals of the bond market, that is, with an “hawk” attitude by its president Jerome Powell who provided and indicated only two cuts of the Fed Funds during this new year, thus disappointing the expectations of the market of at least four bearish moves. Therefore in the United States the central bank will certainly adopt a more gradual approach in reducing interest rates, still maintaining the cost of relatively high money (today 4.25%-4.50%, compared to a neutral rate (between 3.75%and 3.50%) between Restrictive and expansive monetary policy, to combat an inflation that could still surprise upwards due to the good performance of the economy (we remember the last data of the gross domestic product which is positive for 3.1% and the fact that prices have fallen of the goods but not the same those of the services) and the labor market (256’000 new jobs in December in the non -agricultural sector, today, almost double the expected). Irrifying yourself, pushing the returns of the longer deadline to the maximum levels already touched during 2022.
Economic situation in Europe
In Europe, the situation is different, as the economic trend is decidedly weaker and the inflation much more under control. In order to support the economies of the euro area, interest rates should continue to gradually descend, as already outlined by the European Central Bank. In addition, the restrictive maneuvers of their respective European governments to reduce deficits could also limit the offer of new bond emissions, exerting further raised pressures on the prices of existing government bonds. Europe normally follows America, therefore fears of possible new overseas inflationary pressures-however, to be considered new local problems of energy supply following the Russian-Ukrainian conflict-have also led to a sudden descent of the prices of the bonds in Euro.
Investment suggestions
A gradual and progressive elongation of the portfoli duration is suggestible :. As far as American government bonds are concerned, it seems interesting to buy long deadlines as as mentioned their yield has returned to 4.75% – 5% area, but less to focus on a price rise and more to get a carry, a return coupon, and an interesting yield-to-tority.
In Europe the same principle applies but for the reverse reason: here it is legitimate to expect a re -evaluation in capital account; Consider that the 10 -year -old title of state makes 2.58% annually today against 2.03% in early December, the Italian BTP went from 3.20% to today’s 3.75%; In this case, the new thirty-year BTP 4.30% 01.10.2054 is also worth mentioning, which from its price maximums to 108.50 share today about 99.50, for a yield-to-maturity that went from 3.85% to 4.35%.
Given that it does not seem to be the will of the ECB to return to the rate levels seen in 2022 when the inflation has gone out of control upwards and to double -digit, they seem a good progressive purchase opportunity;
We will certainly also see a good offer of new corporate emissions in the next few days with the restart of the market, those investment grade European are preferred to these levels of rate compared to securities with lower rating following the lower corporate risk and will offer returns with interesting additional differentials Compared to the corresponding government securities of the same deadline (on average between 0.50% and 1.50% more).