Further ECB easing could see Bund yields rebound

The weakness of the euro-zone economy and the persistent threat of deflation should keep German government bond (Bund) yields relatively low. However, any scaling back of fiscal austerity and the adoption of quantitative easing (QE) by the ECB are now more likely to lead to higher Bund yields than to reduce them further. The prospect of a renewed rise in US Treasury yields adds to the upside risks.

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