Quantitative Analysis /
Germany

German 10-year yields might hit 0% before heading lower

  • Yields have risen 0.28% year to date – a significant move

  • A stall in the historically falling yields may signal a short-term shift in sentiment, with 0% becoming a target

  • The longer-term downward momentum will be difficult to oppose, which is confirmed by our 12-month projection

German 10-year yields might hit 0% before heading lower
James Huckle
James Huckle

Quantitative Analyst

Tellimer Research
14 April 2021
Published by

Strong start to the year

The increase of 0.28% for the German 10-year bond yield since the beginning of the year is significant, with it finally managing to break out from the prior 12-months of largely rangebound trading. This signals an upward shift in short-term momentum and increases the likelihood of targeting 0% over the coming months, according to our machine learning model.

YTD yield chart for German 10-year bonds

German 10 year yield chart YTD

0% inflection point

0% has become a psychological inflection point, whereby the market either decides to continue lower for the foreseeable future or gains enough confidence to test out higher levels. It will be difficult to oppose the historical trend of lower yields, but caution must be taken around this level as a regime shift is possible.

Flattening off

The rate of decrease in yields has begun to flatten off since 2016 – a clear signal of the reluctance to head deeper into negative territory. However, there is no clear sign yet of the reversal of this long-term trend. Most markets will begin to transition sideways for an extended period of time before a consensus is reached.