19:18 7 February 2025
State Street Predicts Strong Performance for European Government Bonds
Strategists at State Street Global Advisors (SSGA) anticipate that European government bonds will yield substantial returns this year. They expect the U.S. to impose tariffs on European imports, which could negatively impact Europe's export-driven economy. In response, the European Central Bank (ECB) may implement more aggressive monetary easing measures.
SSGA forecasts that the ECB will reduce its main interest rate from the current 2.75 percent to 1.5 percent, exceeding market expectations of a cut to 1.9 percent. In contrast, the U.S. Federal Reserve is projected to make only a 25 basis point rate cut this year. This divergence could lead to European bonds outperforming their U.S. counterparts.
"This could be the year for European government bonds. There will be a greater reduction in rates in Europe than in the U.S," Altaf Kassam, SSGA's Head of Investment Strategy for EMEA, stated,
The potential for U.S. tariffs on European goods has already influenced bond markets, with European bonds appreciating following comments from U.S. President Donald Trump indicating that such tariffs are likely.
