Interesting return opportunities with short-dated bonds

“We are currently rather optimistic with a view to European sovereign bonds with short to medium maturity,” Oliver Eichmann, head of Investment Strategy Bonds, says. In Europe, we expect two further rate hiking steps by the ECB. This should mark the end of this hiking cycle for the time being. Combined with slowing growth and waning inflation, this should, in his view, be a good time to consider fixed-income assets. Eichmann adds: “In such a context, yields on short bonds tend to fall so that chances of price gains have the potential to rise correspondingly.” This will be particularly the case if the market is dominated by the view that a rate hiking cycle of the central bank is drawing to a close pretty soon. Due to higher yield levels, bonds from Italy and Spain continue to be interesting. “We do not, however, expect any further narrowing of spreads versus Bunds,” Eichmann states. Higher rate levels and falling asset purchases tend to be a burden on countries.