We believe The New Neutral of lower-for-longer equilibrium policy rates remains a valid anchor over the medium term. The key drivers of low equilibrium rates – including demographic trends and the high level of leverage in the global economy – have not substantially changed since the financial crisis.
Economic recovery is in full swing but investors should remain vigilant of the long-term risks.
Centrist candidate Emmanuel Macron will be inaugurated as the next French president on 14 May, thanks to a clear win in the second-round runoff against the far-right candidate Marine Le Pen.
Markets breathed a sigh of relief today as the moderate centrist candidate Emmanuel Macron qualified for the second round of the French presidential election in two weeks, together with the far-right anti-establishment candidate Marine Le Pen.
Market nerves in anticipation of the French presidential elections in April and May 2017 have driven a spike in 10-year French and Italian government bond spreads, which have climbed 30 to 40 basis points (bps) in recent weeks (to 75 bps and 195 bps over bunds, respectively).
With around 60% of voters opting for a “no” and nearly 70% turnout, Italians on Sunday firmly rejected a constitutional reform that would have removed power from the Senate and left the lower house as the key legislative chamber.