Yields and spreads

chart of the month

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Government bond yields recently hit new all-time lows in Europe, indicating a deteriorating economic environment. Credit spreads, in contrast, still trade at 'strong-growth' levels. Is this another break in traditional correlation patterns?

We don't think so. The relationship is still intact from a pure fundamental point of view. Despite stagnating economic growth in Europe, macro fundamentals are strong enough to support credit markets, although positive impulses from the macro environment

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