Investors turn to European bonds

Added: (Thu Jan 03 2008)

Pressbox (Press Release) - Cheap government securities in Europe are offering more attractive returns for bond investors as they abandon US treasury bonds.

Slowing economic growth and lower interest rates in the US and the highest yield differential between German and US two-year notes since October 2003 are motivating investment managers to take their money to Europe.

"We are buying two-year money in Europe on the belief there's value there, and that eventually the [European Central Bank] will be forced to cut interest rates,'' Richard Batty, global investment strategist at Standard Life in Edinburgh told Bloomberg.

"We don't have that position in the dollar market," he noted. The US Federal Reserve has dropped interest rates three times in the past few months and Treasury bonds were up 9.06 per cent.

The fixed-income research team at Lehman Brothers told Bloomberg it is advising clients to sell shorter-maturity US debt and buy bonds in Europe.

Further analysis of investment in the bond market could be supplied by Aranca, an end-to-end provider of on-demand, custom investment, business and economic research.

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