BNP Paribas strategists argue that Europe is emerging as an alternative safe haven, with the Euro gaining ground as a global safe asset. They note that the European Central Bank’s (ECB) work highlights stronger demand for Euro assets and a higher convenience yield on German bunds, which supports broader Eurozone financing conditions. They stress Europe’s industrial resilience, services strength, tech momentum and improving policy and geopolitical backdrop.
Euro benefits from haven re-rating
“All this turmoil has already made Europe look more attractive, as a haven of stability.”
“Last week, the ECB’s annual report on The International Role of the Euro revealed that the euro is catching up as the world’s safe asset of choice.”
“On multiple occasions, during recent episodes of market turmoil, the euro behaved more like a safe asset than the US dollar.”
“Financial markets have noticed: the so-called convenience yield[2] on German bunds rose threefold from 30 bps to 90 over 2023-25.”
“To the extent that all other bonds (sovereign and private) in euros are priced off German bunds, this benefits the entire Eurozone economy.”
