The central banks record reviving monetary policy has brought plenty of extra liquidity to the market. This has led to the fact that the yield of bonds has sunk exceptionally low near zero.
The abundant liquidity and the low interest rates have compelled the investors to search for yield from riskier investments, Pessala states in Evli Pankki report. “The yield potential of the interest market has approached the zero so the investors have moved the cash and the safe interest investments with an accelerating speed to risky high-yield corporate bonds and shares”, Pessala states.
The interest rate will remain low next year also.
“I believe that the interests remain next year low and mostly move sideways”, says Pessala. The interest level is directed by the monetary policy of central banks and by the inflation expectations. Therefore the central banks do not change their key interest rates in the environment of weak growth and of the trivial inflationary pressure.
Instead yields of treasury bonds remain low for the same reason. “The bond market of Europe and USA begins to resemble Japan’s bond markets more and more.”
Even though the demand for the investment of companies and for credits stays down below, growth can be still expected next year also on the stock markets. Central banks still serve as the growth driver of shares.
The abundant liquidity and the lack of alternatives compel the investors to search for yields from the stock markets even though the results of companies do not even increase with share prices in step. The shares rise further, Pessala estimates.