LONDON, Jan 12 (Reuters) - HSBC said on Thursday it had revised up its forecasts for German government bond yields and no longer sees them ending the year in negative territory.
The bank said that long-term it sees upward pressure on Bund yields given heightened inflation fears, although growing political uncertainty and the ECB’s bond-buying stimulus scheme should limit any rise.
“We have revised our forecast for the 10-year Bund yield higher by 65 basis points to 0.60 percent at end-Q3 before falling to 0.35 percent year-end from minus 0.20 percent previously,” the bank said.
German government bonds are the benchmark for borrowing costs in the euro area and often set the tone for bond trading in the region. The 10-year Bund yield stood at 0.23 percent on Thursday. (Reporting by Dhara Ranasinghe, editing by Nigel Stephenson)