German bond yields to halve

Currently the German 5 year bond is yielding 2.73%, I have a view that within a ‘mid cycle slow down’ this bond may yield between 1.12% and 1.33% within the next 15 months.

If so, (as the chart below implies) this means the price of the German bond would rise and thus the price of the Nasdaq 100 (or let’s broadly say technology stocks) will do the same.

Other than than a lower cost of capital, there are also other scenarios and considerations should this opinion develop.

One example would include relief for banks, insurance and pension funds who are presently suffering from unrealised mark-to-market losses on their longer dated bond maturities.

More on other scenarios later.

April 4, 2023

by Rob Zdravevski

rob@karriasset.com.au