Quotes from Bank of Cyprus:
-Eurozone's main characteristics are low inflation and low growth rates. In the latest ECB's meeting in October, the President of the ECB Mario Draghi, stated that the ECB's balance sheet is to be increased by around 1 trillion EUR through purchasing Covered Bonds, ABSs and providing liquidity via Targeted Long Term Refinance Operations (TLTROs).
-ECB's actions have managed to set a slowdown in inflation but at the moment have not managed to reverse the situation. In this respect, we expect that a broader based QE will be announced by the end of Q1 2015. This might entail the purchase of supranational bonds, purchase of corporate bonds and eventually purchase of government bonds.
-In this respect, we expect the yields of EU government bonds to stay at the beginning of the year at the same levels of now or even lower. However, as we progress through the year we see that the growth driven from the US and the oil prices will eventually come in Euro zone and we view that by the end of 2015 the Bund will close at 1.30%-1.50% from 0.61% currently.
-Therefore, again for the first quarter of 2015 we are equal weight on governments Euro zone bonds with a view to change this outlook for the next quarter.
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