logo
European bond yields set to rise as US' Ukraine stance boosts military spend: BNP Paribas

European bond yields set to rise as US' Ukraine stance boosts military spend: BNP Paribas

Long-term European government bond yields will continue to rise amid increased government spending on defence as a result of the US retreat from its commitment on Ukraine, according to BNP Paribas Asset Management.
Advertisement
'We're beginning to get a steepening of the European yield curve,' said James McAlevey, the French bank's head of global aggregate and absolute return. This means that long-term yields are growing faster than short-term ones.
A week ago, US President Donald Trump ordered a 'pause' on aid to Ukraine to pressure Ukrainian President Volodymyr Zelensky to engage in negotiations to end the war. As the US withdraws its support, European countries have been reinforcing their commitments.
'European fixed-income investors are waking up to the idea that even within Europe, we're going to start getting more fiscal expenditure on defence, not less,' said McAlevey, 'We're not talking small numbers here.'
On March 1, the UK approved a £2.26 billion (US$2.9 billion) loan to Ukraine to enhance its defence capabilities. On Tuesday, the European Commission announced a plan to lend up to €150 billion (US$162.7 billion) to member states to help them boost military spending.
Advertisement
Total 2024 defence expenditures by European Union member states were estimated at €326 billion, or about 1.9 per cent of the EU's gross domestic product. The proportion is expected to approach 3 per cent as they ramp up their spending.
The bond-yield curve started to steepen because the market was anticipating bond issuances as governments raise money to support the higher spending, McAlevey said.

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

EU says ‘too early' to say if spike in Chinese exports could prompt emergency measures
EU says ‘too early' to say if spike in Chinese exports could prompt emergency measures

South China Morning Post

time8 hours ago

  • South China Morning Post

EU says ‘too early' to say if spike in Chinese exports could prompt emergency measures

The European Union says it is 'too early to conclude' whether sky-high US tariffs on Chinese goods have caused a diversion of exports to the bloc that would cause it to take emergency measures. Advertisement This was despite a surge in Chinese exports to the European Union coinciding with a big drop in shipments from China to the United States in May. China's shipments to the US last month fell by 34.5 per cent from a year ago, while its exports to France rose by 24.1 per cent and to Germany by 21.5 per cent, according to calculations based on Chinese customs data that was released on Monday. But when presenting the findings of a new customs surveillance system designed to catch trade diversions that could harm EU industries , the European Commission said such spikes in trade did not necessarily point to this trend occurring yet. 'On the basis of the very first set of results, it's not possible to draw any conclusions … because it's too early to conclude whether there is trade diversion,' an EU official, one of several who were authorised to brief journalists on an anonymous basis, explained. Advertisement 'You need a bit of a trend to be observed to conclude whether that's the case or not - and we're not there yet. We need a few more reports for establishing a trend and, secondly, the question of whether this is causing harm for EU industry.'

Trump says China, US agree to ‘done deal', Beijing's C919 ambitions: SCMP daily highlights
Trump says China, US agree to ‘done deal', Beijing's C919 ambitions: SCMP daily highlights

South China Morning Post

time8 hours ago

  • South China Morning Post

Trump says China, US agree to ‘done deal', Beijing's C919 ambitions: SCMP daily highlights

Catch up on some of SCMP's biggest China stories of the day. If you would like to see more of our reporting, please consider subscribing China and the US have agreed to 'a done deal' that includes rare earth exports from China and Chinese students attending colleges in the US, President Donald Trump said on Wednesday, pointing to a potential breakthrough aimed at cooling trade tensions that had been reignited by mutual accusations of deal violations. China will push for civil aviation to be a topic of discussion at a summit with European Union leaders in July, with particular focus on the certification of the domestically produced C919 aircraft, according to a source with knowledge of the matter.

China joins growing chorus over planes, parts tariffs
China joins growing chorus over planes, parts tariffs

RTHK

time16 hours ago

  • RTHK

China joins growing chorus over planes, parts tariffs

China joins growing chorus over planes, parts tariffs Boeing is among companies in the industry weighing in against tariffs on planes and parts. File photo: AFP Five nations and the European Union, as well as airlines and aerospace firms worldwide, urged the Trump administration not to impose new national security tariffs on imported commercial planes and parts, documents showed. Airlines and planemakers have been lobbying President Donald Trump to restore the tariff-free regime under the 1979 Civil Aircraft Agreement that has yielded an annual trade surplus of US$75 billion for the US industry. The documents made public by the US Commerce Department on Tuesday bared concerns over the fallout of possible new tariffs expressed by companies as well as nations such as China, Canada, Japan, Mexico and Switzerland, besides the European Union. "As reliable trading partners, the European Union and United States should strengthen their trade regarding aircraft and aircraft parts, rather than hinder it by imposing trade restrictions," the EU wrote. It would consider its options "to ensure a level playing field", it added. Trump has already imposed tariffs of 10 percent on nearly all airplane and parts imports. "No country or region should attempt to support the development of its domestic aircraft manufacturing industry by suppressing foreign competitors," the Chinese government wrote. Separately, US planemaker Boeing cited a recent trade deal unveiled in May with Britain that ensures tariff-free treatment for airplanes and parts. "The United States should ensure duty-free treatment for commercial aircraft and their parts in any negotiated trade agreement, similar to its efforts with the United Kingdom," Boeing told the Commerce Department in a filing. Mexico said in 2024 it exported US$1.45 billion in aircraft parts, just a tenth of the total, to the United States. The EU said it took US exports of aircraft worth roughly US$12 billion, while exporting about US$8 billion of aircraft to the U.S. In early May, the Commerce Department launched a "Section 232" national security investigation into imports of commercial aircraft, jet engines and parts that could form the basis for even higher tariffs on such imports. Last week, Delta Air Lines and major trade groups warned of tariffs' impact on ticket prices, aviation safety and supply chains. "Current US tariffs on aviation are putting domestic production of commercial aircraft at risk," Airbus Americas chief executive Robin Hayes said in a filing. "It is not realistic or sensible today to create a 100 percent domestic supply chain in any country." Boeing said it had been increasing US content in its airplanes over the last decade and its newest airplanes, the 737 MAX 10 and 777X, would have "more than 88 percent domestically-sourced content." The United Auto Workers union, which represents 10,000 aerospace workers, said it supports tariffs and domestic production quotas, adding that US aerospace employment has fallen to 510,000 in 2024 from 850,000 in 1990. "To safeguard the entire aerospace supply chain across the commercial and defense sectors, comprehensive tariffs and production quotas on several products are needed," it said. JetBlue Airways opposed new tariffs, however, saying, "trade policy should reinforce, not destabilize, the proven systems that keep our aircraft flying safely and affordably". (Reuters)

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store