Bunds increasingly vulnerable to erosion of safe haven status

German government bonds are still regarded as a safe haven, allowing them to benefit from concerns about the global economy and the rolling crisis in the periphery of the euro-zone. Some of the receipts from the ECB’s LTROs will also have been parked in Bunds. However, we continue to expect Bunds to lose some of their appeal as further bail-outs dent Germany’s creditworthiness and growing doubts about the future of the single currency encourage many investors to shun euro assets altogether.