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78f9d2ea5ca0f8f3c15152a39cf67fcc9dd137dca0dd16475431b4028419a930;;[{"layout":"detailed","uid":24424,"publicationDate":"01 Feb 21","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/fxfistrategy_docs_2021_179093.ashx?EXT=pdf&KEY=KZGTuQCn4lsvclJnUgseVCsY1pNwWYpSseITqiopMUYb21i9hmCfCA==&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Rates Perspectives - EU bonds and Bunds...mirror, mirror on the wall, who is the safest of them all?","titleDe":"","titleIt":"","product":"Rates Perspectives","synopsis":"<ul class=\"ucrBullets\"><li> EU bonds will become an important new component of the European sovereign market. In principle, they will establish the much desired common euro-denominated safe asset with a \u201cpolitical joint and several\u201d structure.<\/li><\/ul><ul class=\"ucrBullets\"><li> In reality, however, compared with the strongest eurozone sovereigns, their pricing will reflect two aspects: liquidity and the perception of the political strength of the EU project. As the EU budget is ultimately guaranteed by the member states, EU bonds should not trade tighter than its strongest member.<\/li><\/ul><ul class=\"ucrBullets\"><li> The outperformance of EU bonds versus Bunds since the first SURE transaction reflects expectations that these assets will gain prominence and their liquidity will improve, making them more similar to sovereigns. We expect further tightening as a result.<\/li><\/ul><ul class=\"ucrBullets\"><li> At current yield levels, we prefer EU bonds to small and medium-sized sovereigns. At the extra-long end, we regard EU bonds as expensive versus Bunds and prefer OATs, which offer a considerable yield pickup. <\/li><\/ul><ul class=\"ucrBullets\"><li> The strong secondary-market performance of the EU SURE transactions was spread-supportive for other European supranationals. We expect EU bonds to trade more expensive than other E-Names.<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Luca","last":"Cazzulani","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=39&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=44e3fa0de8cdd1ffaea59e3843112f22"},{"first":"Julian","last":"Kreipl","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=128&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=2dee1f2fe767be73f3820cb445dc27da"}],"countries":[{"name":"Europe","ticker":"","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=country&tx_research_piedition%5Bcountry%5D=26&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=253d12e5521ae4b9a73e892ee04713f2"}],"hash":"78f9d2ea5ca0f8f3c15152a39cf67fcc9dd137dca0dd16475431b4028419a930","available":"0","settings":{"layout":"detailed","size":"default","showanalysts":"2","showcompanies":"2","showcountries":"2","showcurrencies":"2","nodate":"0","notitle":"0","noproduct":"0","noflags":"0","dateformat":"d M y","nolinktitle":"0","synopsislength":"300","synopsisexpand":"1","shownav":"0","oldestedition":"","limit":"5"}},{"layout":"detailed","uid":23724,"publicationDate":"29 Oct 20","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/fxfistrategy_docs_2020_178319.ashx?EXT=pdf&KEY=KZGTuQCn4lsvclJnUgseVFcI2-vTFR2nRi29dMwdIovM3G3jxYh8vw==&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Rates Perspectives - Exploring the impact of EU bonds on the EGB market","titleDe":"","titleIt":"","product":"Rates Perspectives","synopsis":"<ul class=\"ucrBullets\"><li> The ECB\u2019s strong presence in the sovereign-bond market, which we expect to continue through next year, together with robust demand from foreign central banks will further increase the scarcity of safe assets in the euro area. <\/li><\/ul><ul class=\"ucrBullets\"><li> EU bonds could become an alternative to Bunds going forward, given their high rating, provided that their outstanding grows fast. Low ECB buying would also be desirable, to leave most outstanding bonds to private investors. From a portfolio perspective, EU bonds have shown a high and stable correlation with Bunds.<\/li><\/ul><ul class=\"ucrBullets\"><li> Small and mid-size sovereign issuers are likely to face stronger competition from EU bonds, given they will feature similar liquidity. EU bonds also offer good diversification relative to semi-core bonds, as underpinned by their more-stable performance in times of market stress.<\/li><\/ul><ul class=\"ucrBullets\"><li> The EU will become a key player in the EUR-denominated SSA primary market, but we do not expect that the higher liquidity and volume of EU bonds will negatively influence demand for other Supras and Agencies due to the relatively small yield pickup they offer.<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Luca","last":"Cazzulani","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=39&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=44e3fa0de8cdd1ffaea59e3843112f22"},{"first":"Julian","last":"Kreipl","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=128&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=2dee1f2fe767be73f3820cb445dc27da"}],"countries":[{"name":"Europe","ticker":"","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=country&tx_research_piedition%5Bcountry%5D=26&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=253d12e5521ae4b9a73e892ee04713f2"}]}]

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Julian Kreipl, CFA
Credit Strategist - ESG
UniCredit Bank AG, Munich
Am Eisbach 4 -
80538 Munich
Germany
+49 89 378-12961

Julian Kreipl is a credit analyst in UniCredit’s Financials Credit Research team, with a focus on the SSA and ESG universe. Julian joined UniCredit in 2018 after gathering more than five years of...

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