On Wednesday, the European Central Bank published its latest financial stability review.
It makes for gloomy reading.
The euro-area outlook remains fragile. The full impact of higher rates and tighter financial conditions has yet to hit the real economy. When it does, it won’t be pretty.
“The weak economic outlook along with the consequences of high inflation are straining the ability of people, firms and governments to service their debt,” states ECB vice-president Luis de Guindos.
Urged on by the sell side, bond investors have striven in recent months to rebalance portfolios towards high-quality names.
Current yields should provide attractive returns, with positive returns possible across a range of scenarios, and particularly in negative economic scenarios
Mark Haefele, UBS
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