As widely anticipated, the ECB maintained its benchmark refinancing rate on hold at a record low of 0.0% on April 21st 2016, following a 5 bps cut in the previous month. 

As we expect the downward pressure on long yields to continue in the coming months, we maintain our general recommendation of moderately underweighting duration on the liabilities side on the EUR curve.

We expect the ECB’s increased QE purchases as well as dovish central banks globally will result in downward pressure on global yields in coming months.  

Take advantage of yield fall to lock in interest rates:

We recommend that borrowers take advantage of any fall in interest rates to increase the proportion of fixed-rate debt in their debt portfolios.

We continue to expect long yields to trend higher in the medium term and recommend capitalising on any fall in interest rates to increase the proportion of fixed-rate debt in debt portfolios.

Long-term yields surged in April 2015 following an extended period of significant yield falls.

We would not rule out a similar scenario happening again – though we do not expect it – and therefore recommend that borrowers consider gradually adding fixed-rate debt as interest rates fall.

We continue to see most value at the long end of the yield curve, i.e. from 10 years and beyond, on the EUR curve.