Weekly Economic Briefings > Eurozone Weekly Economic Briefing > Eurozone

European bond yields fell to new record lows this week with German 10 year yields falling to just 2 bps. This strong desire for safe haven assets reflects both the aftershock of weak payrolls data in the US but also the elevated levels of political uncertainty in Europe stemming from the UK Brexit debate and the upcoming Spanish elections. Concerns about the health of the wider global economy however remain misplaced at least from a European perspective. The euro area looks on course to record growth of 1.8% this year, while we think inflation will bounce back to 2% as early as the first quarter of next year. Nominal GDP growth of 4% therefore seems inconsistent with bond yields this low. On the data front, this weeks Sentix survey points to a sharp pick up in sentiment in June which is likely to set the tone for subsequent ZEW and IFO surveys. This suggests the negative impulse from concerns about growth in China may be beginning to dissipate. With net trade having made a significant negative contribution to growth for the last three quarters, even a neutral external environment should set the state for faster growth in H2.