It has again been a volatile week in the financial markets. 10Y Bunds almost reached 2.95% during the week but has declined and are trading around 2.85%. 10Y US Treasuries has also been trading in a wide range between 4.15% and 4.35% and is currently at 4.26%, Danske Bank's FX analysts Kristoffer Kjær Lomholt and Filip Andersson report.
Next up is France up for review by Fitch
"If we look at the inflation expectations measured by the 5y5y forward inflation, the EUR inflation has risen while it has declined in the US which also corresponds to the move in interest spreads, where US has outperformed Eurozone EGBs."
"Tonight, we have France up for review by Fitch. France is on negative outlook by Fitch and there is a significant risk of a downgrade. Recently, S&P placed France on negative outlook. Fitch has France on AA- and a downgrade to A+ could lead to some sell-off as fewer investors will/can hold France. Portugal is also up for review by Fitch, and is on positive outlook. Here we could see an upgrade like S&P did two weeks ago."
"We also have Spain up for review by S&P and Greece by Moody's. Moody's has Greece on positive outlook, and we expect an upgrade given the significant economic restructuring that Greece has been doing for more than a decade. Hence, the periphery is in virtuous circle while France is in a vicious circle."
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