Eurozone government bonds — where the curve still pays to wait

Two- to five-year eurozone sovereign paper continues to offer real yield with limited duration risk. As spreads across issuers compress, the question is less whether to own government bonds than which part of the curve, and which issuers, still pay to wait.

The front-to-belly of the curve captures most of the available yield while leaving portfolios far less exposed to the price swings that come with long maturities. For clients whose priority is capital preservation with income, that trade-off remains compelling.

Relative value across issuers

Core. German and other core issuers anchor quality and liquidity; we hold them as ballast rather than for yield.

Semi-core. France and peers offer a modest pick-up for high-quality exposure, useful for diversifying the core allocation.

Periphery. Spreads have compressed as fiscal narratives improved. We retain selective exposure but are more discriminating at these levels, mindful that the easy spread tightening is behind us.

The discipline is to be paid for the risk actually taken. Where the curve rewards patience, we wait; where it does not, we look elsewhere for income.

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This commentary is provided for information only and does not constitute investment, tax or legal advice. The value of investments and any income from them can fall as well as rise. Figures cited are illustrative for this prototype.