Europe’s Bond Markets Set for Cash Windfall Before QE Begins

(Bloomberg) -- Bond investors are heading for an October boost even before the European Central Bank adds support to the market with its latest wave of quantitative easing.

The region’s debt markets will receive cash flows of almost 150 billion euros ($164 billion) from bond redemptions and coupon payments, the most this year, according to Barclays PLC. Investors are likely to channel the money back into the market, says Rainer Guntermann, a strategist at Commerzbank AG, helping fuel this year’s record-breaking bond rally.

Yields on the region’s debt have tumbled to record lows this year as investors seek refuge from a slowing global economy, Brexit uncertainty and simmering U.S.-China trade tensions. Bond payouts may dwindle in November but the ECB is likely to offset this when it unleashes fresh quantitative easing at the rate of 20 billion euros per month.

October is set to be “the year’s most market-friendly month from a net cash flow perspective” say Cagdas Aksu and Max Kitson, fixed income analysts at Barclays, while Commerzbank’s Guntermann thinks the bonds will climb in the coming five weeks.

France will pay out the largest amount in October, with some 55 billion euros of bond redemptions and coupons, according to Barclays. During the same month it estimates the nation will sell 20 billion euros of debt.

October’s bond payments compare with April’s total of 102 billion euros and 130 billion euros 12 months ago.

To contact the reporter on this story: James Hirai in London at jhirai3@bloomberg.net

To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, William Shaw, Anil Varma

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