Citigroup, Societe Generale and Bank of America Merrill Lynch all see German bunds as overvalued, Bloomberg reports, as the pace of ECB bond-buying slows.
“The year-end duration grab will end very soon. QE probably only has two weeks left at this pace,” Citigroup strategists led by Harvinder Sian were quoted as writing in a note to clients. “Bund valuations are increasingly hard to justify, both technically and fundamentally.”
The 10-year government bonds rallied after the ECB said in October that it would cut bond purchases in half next year, but would step up or extend them if needed. Signs of continued strong economic performance in the euro zone, as well as fading political risk, are making it increasingly unlikely that the ECB will postpone tapering.
Societe Generale says that yields could climb to 0.85% by next September, the highest level since 2015.