Deutsche Bank: Is It The Right Time To Go Long EUR Rates?

Deutsche Bank analysts note that “while the risk reward is increasingly favourable in the front-end of the EUR curve from a valuation perspective, especially in real space.”

• However, they caution that the “valuation argument does not extend further out the curve in nominal space as both term premia and breakevens are low in absolute terms and relative to the US.”
• “Moreover, data and positioning may prove to be a constraint in the short run.”
• “Finally, the structural challenges posed by Covid and geopolitical developments (defence, energy independence and supply chains) remain a medium-term factor supportive of a structural shift towards easier fiscal policy in Europe.”