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2021/02/22 / Erste Group Research

How will the recovery progress?

This year will be anything but easy for bond market participants. In the euro zone, the challenge will consist of having to deal with pronounced volatility in inflation rates. Uncertainty is greater in the US. This is due to the fact that the bond market will have to assess the impact of massive public sector stimulus packages. Uncertainty clouds both economic areas with regard to when and how quickly economic growth will gather pace once the spread of COVID-19 has been brought under control. One question is whether there will be supply bottlenecks and consequently upward pressure on prices. It will be difficult to bring the underlying inflation trend into relief when technical aspects, base effects and temporary spikes are overlapping. Bond markets are preparing for this scenario at present.

In this environment, the European Commission will begin to issue bonds on behalf of the EU to finance the EU’s Next Generation program. There will be additional bond issues under the SURE program. EU bonds have the potential to become an alternative benchmark to German Bunds for the euro zone in coming years.

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General information

AuthorErste Group Research
Product nameInterest Rate Outlook Eurozone, USA
Topic in focusMacro/ Fixed income
Economy in focusEurozone, United States
Currency in focusEuro, US Dollar
Sector in focus-


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