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From bonds to equities: How to trade QE

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As bond yields across Europe turn negative, why are people still investing in them? Simon Fasdal who is head of fixed income at Saxo Bank explains that professional investors such as banks and pension funds, have to hold bonds because of strict regulations. He also points out that central banks including the ECB are also offering negative yields.

So how low can yields go? Fasdal says it will be a question of how aggressive the ECB will be in the market. The more they buy, the lower the yields will fall due to a lack of supply. We should find out more from the ECB later this Thursday.

So how should private investors trade QE? Fasdal says they should avoid government bonds at the moment but continue to look at corporate bonds. But he also says that equities love QE and points to what's happened in the US and Japanese markets following the introduction of stimuli programmes. In that context, he says: "We could be on the verge of a huge spring rally in European equities."