Asian stocks are consolidating their current levels, after the 'recovery' of the last few weeks. The Japanese GDP slowed down more than expected but hopes for central bank stimulus are still alive. The euro remained stable against the US dollar but weakened against the Australian dollar - a currency sensitive to risk - which reached a record high (almost 0,86) against the single currency.
In the markets there is a singular concern for German Bunds. The judgments of many investors are negative: Germany will have to bear other expenses to save the euro, and therefore the Bunds are no longer a good investment: in recent weeks the 'total return' has been negative. However, there is a different – and more convincing – reading: Bund rates are abnormally low, and the cause of near-zero yields is the safe-haven effect. If the situation in Europe were to improve, the safe haven effect would vanish and yields on Bunds would return to normal levels, with consequent losses for those who bought them at rock-bottom yield levels. Any losses on the Bunds would therefore be due to better prospects for the stability of the euro area, and are part of any rate normalization process.
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