Positive reception has been reserved markets in the election of the former Minister of Finance Rishi Sunak as Prime Minister of Great Britain. Investors believe that economic and fiscal stability will be the new government’s priorities to avoid the risk of further market turmoil, while limiting their assessment of the extent of the expected Bank of England (BoE) rate hike next week. Tellingly, following the change in fiscal policy announced last week by Chancellor of the Exchequer Jeremy Hunt, government bond yields fell further after the election of a new prime minister, returning to levels seen before September 23, when a mini-budget that included the largest – unsecured – tax cuts since the early 1970s. As a result, investors no longer charge government bonds the “risk premium” they charged under former Prime Minister Liz Truss, due to strong concerns about the country’s financial soundness.

European government bond prices also edged higher last week amid worrisome signs of a looming recession in the eurozone and a possible end to the ECB’s rate hike cycle at lower-than-expected levels. The eurozone composite PMI remained below the critical 50 level that separates growth from contraction in October for the fourth consecutive month, falling from 48.1 in September to 47.1, its biggest monthly reading. periods of self-isolation due to the pandemic). Positive sentiment also dominated US government bond markets after a series of weaker-than-expected economic data coupled with reports in the international press that supported the Fed’s possible move to a less aggressive monetary policy in the coming months. to reduce the risk of a sharp economic slowdown.

The retreat of US Treasury yields from recent 15-year highs has led to a weakening of the dollar in currency markets.

* Department of Financial Analysis and Research of International Capital Markets of Eurobank.