A bond's yield – which moves inversely to its price -- is the amount of interest paid to an investor. Low government bond yields indicate that investors have confidence in a country's ability to repay its debt, and view its sovereign bonds as a relatively safe investment.
Bob Janjuah, co-head of cross-asset allocation strategy at Nomura, said "you have to like bonds," given the worrying macro-economic environment.
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"I think deflation is a global theme and central bank success in defeating deflation has been limited – even for the Fed," he told CNBC Europe on Monday. "Fixed income is the unpopular trade out there because look at where yields are; where can they get to? I think we will see 10-year Italy and Spain yields down at 1 percent."
Benchmark 10-year bond yields are currently trading around 1.53 percent in Spain and 1.67 percent in Italy, having both fallen over 70 basis points in the past three months.
A move to 1 percent would be significant because less than three years ago benchmark yields in Spain and Italy soared above 6 percent amid fears about the euro zone's sovereign debt crisis.
"The reason that bonds yields have tightened so dramatically is not because of any fundamental change in the economies becoming any better, although some like Spain have seen great improvement and have carried out reforms," said Bill Blain, a strategist at Mint Partners in London.
"The reason comes from (ECB President Mario) Draghi's promise to 'do whatever it takes' to save the euro and all the discussion about QE on Thursday," he said. "And the expectation is that if QE happens, there will be a further burst of bond buying causing yields to tighten to 1 percent in Spain and Italy. Personally I doubt that's going to happen."
Blain said that if the market perceives an ECB bond-buying program as too little, too late, yields in the euro area were unlikely to fall much further.
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