BofA: Private Demand Back Into EUR Core Primary Markets

Bank of America write “bond auctions from core Eurozone countries have recently experienced high demand in both qualitative and quantitative terms. The same does not apply equally to other sectors.”

• “Earlier data (to H123) indicates a significant increase in demand from hedge funds and from non-Euro Area investors. It is unlikely that this type of demand is applicable to the Euro Area more broadly and we assume this is more down to re-allocations away from riskier alternatives. Nevertheless, this positioning build up may provide some context around the spillover of higher US rates into EUR market.”
• “Long core positions from non-residents and fast money is not a qualitative improvement given their volatility but we think, helped by the slow issuance until year-end and the current duration demand, a shallow lower rates trend can likely mobilize the domestic real money, whose portfolio have room to go further long given seven years of QE.”