Political instability in Europe is widening yield spreads and revamping fears over debt sustainability across the region, leading to speculation that the European Central Bank will need to continue with its ultra-loose monetary policy.
The risk premium on French bonds has returned to their 2012 crisis levels. Greece is once again making headlines, with growing concerns that the country will not be able to pay back its debt, which is mostly owned by the European Central Bank (ECB). Italian sovereign yields have risen as the country seems closer to snap elections. Spain could see the region of Catalonia making another bid for independence. Brexit negotiations should also kick start next month but the list goes on and on.
Amid so much uncertainty, investors are getting nervous and German sovereign bonds – known as bunds – are becoming a "buy" option, according to some.