Europe Returns to the Bond Market as Geopolitics Boosts Demand

(Bloomberg) — European bond sales are set to kick off in the first full week of 2020, as governments return to a market boosted by tensions in the Middle East.

Portugal, Ireland and Belgium should issue debt maturing in 10 to 15 years at syndicated sales, according to Danske Bank A/S, while regular auctions are due from Germany, Austria, Spain and France. After several months of sagging prices, global bonds are back in demand as haven assets following a U.S. airstrike that killed an Iranian general, sparking fears of a wider conflict.

Bonds could also advance as investors snap up the securities to sell on to the European Central Bank under its latest asset-purchasing program. The ECB relaunched its quantitative easing operation in November, at a pace of 20 billion-euro ($22 billion) per month, increasing demand for regional debt.

“In 2020, the ECB is again set to buy in the secondary market,” wrote Jens Peter Sorensen, chief analyst at Danske Bank. “This would be very supportive for the smaller markets such as Ireland and Portugal.”

Sorensen expects the two nations, and to some extent Belgium, to stick to the “usual” amounts in terms of sizes given their limited funding needs. He sees Ireland, Portugal and Belgium issuing four billion euros, six billion euros and three billion euros respectively. Germany will sell a new five-billion euro bond maturing in 10 years on Wednesday.

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