Bund Yield Reflection of 'Dysfunctional' Environment: Pro

After hitting record lows on Wednesday, German bund yields are reflecting a difficult market environment and could remain low for some time; Richard Urwin, Managing Director and Head of Investment at BlackRock told CNBC’s Squawk Box Europe.


“There is an expectation that short term euro interest rates are going to be very, very low for a very, very long time and I think that’s what markets are now pricing in so yes, I think bund yields do reflect the expectation of a pretty challenged environment,” he said.

Urwin told CNBC that German bund yields were simply reflecting market concerns over the euro zone and until those fears ease, bund yields were likely to remain unattractive.

“I think they’re a reflection of a dysfunctional economic environment and while that economic environment remains dysfunctional, we may well have bund yields of 2 percent or less,” Urwin said.

He added that although he believed the ECB should cut rates, debates regarding conventional policy tools were “slightly academic”.

“With short term rates where they are, (the ECB) can’t cut by very much so I think for the ECB the conventional tools of policy can actually do relatively little at this stage and I think it’s much more about some of the unconventional activities that have been implemented in major scale and may continue to be, which is where the real issue is,” he explained.