BofA: High, Diversified Source Of EGB Demand Here To Stay

Bank of America write “data confirm the continuation of the trend of sizeable, resilient and diversified source of demand for EUR fixed income, and for European sovereign bonds in particular.”

• “The drivers of this trend are structural: domestic savings are high, higher than issuance of fixed income instruments and foreign holdings of EUR fixed income are historically low.”
• “Domestic banks and international investors would likely continue the trend of strong demand seen so far. If EU tail risks materialise, domestics will likely increase allocations.”
• “Within EGBs, OATs are historically the main target for international demand (this is not a Japanese exclusive). The large build-up of these positions adds long-term downside risks for OATs in case French economic policy turns materially worse.”