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    MARKET EDGES

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On Wednesday German 10-year bonds failed to attract enough bids to place the full €6 Billion the German government had sought, amounting to the second worst auction on record in terms of demand. In contrast France and Spain successful sold a total of around €11.4 Billion of bonds yesterday.

French 10-year bond yields traded at about 50 basis points above Germany, while Spanish 10-year bond yield came in a level over 80 basis points higher, with higher demand. This suggests that investor appetite for higher yield outweighs concerns over relative credit risk.

In the coming weeks, global markets will continue to be flooded with bond offerings as governments around the globe raise money for their respective stimulus packages. It seem likely, therefore, that we will see yields start to inch upwards as supply swoons.

Global equities, particularly those we purchased today (USA and Brazil), should outperform bonds as this perpetually bullish Trend in the Bond market comes under fire.

Matthew Hedrick
Analyst