Sovereign bonds are having a moment. Despite gloomy forecasts over the last year and a rise in yields, government-issued bonds have largely reversed course. Treasury bonds are flourishing, but perhaps the most surprising area where government bonds are strong is in Europe. European sovereign bonds have been up and down since the Financial Crisis, with a huge fall in yields after a peak in 2011.Their outlook has been murky because of looming populism, worries about Italian banks, and the Greek debt crisis, but right now they have a long runway to thrive. All of those major issues don’t have any key events in the next few months, leaving room for the bonds to run.
OxWFD: What really seems to have happened in the second quarter is that we have reverted to the regular post-Crisis paradigm, with stocks and bonds both doing well.