00:00If bond yields continue to go higher, what does that mean?
00:03When does that finally start to have an impact?
00:05I almost feel like the action's not on where rates are being set,
00:09committee to committee, but what's happening in bond markets on the long end.
00:13You just had a whole segment on German elections.
00:16There's other elections coming up in Europe,
00:17and I'm worried that even in Europe,
00:20long-term bond yields still have some way to move up.
00:22It doesn't seem that we have any EU member country
00:25which isn't without its risk and could cause actually trouble for the bond market.
00:29You could probably say that France has become the new Italy.
00:36It does seem like there is this renewed pressure on Europe now
00:39to get their fiscal house in order.
00:41Now, Germany doesn't have a fiscal problem per se in that sense,
00:44so that's less of a live issue, but France is the one that is a live issue,
00:47and that's where the risk will really manifest itself.
00:51Why is Europe more of a problem when it comes to debt and bonds than the US?
00:55France has seen a much greater surge in long-end yields over the last kind of five, six weeks,
01:02and it's been about a steepening.
01:04It's been about an added term premium because the French election came up.
01:08They've got a new budget to work out.
01:09They've got 117% debt to GDP rising rapidly.
01:13It's kind of the problem child right now, right?
01:15I mean, the way spreads have moved, it's...
01:17And I say that as someone who has exposure there.
01:20I think there is some value there, but it comes with a lot of noise.
01:24We're very concerned about France, but if we look at the bigger picture,
01:28if we look at the Eurozone in its entirety,
01:31we're seeing also countries that have strengthened their fiscal outlook
01:35over the last couple of years, maybe over a longer period of time.
01:39So if we're looking at Italy, if we're looking at Spain,
01:42we would say that those fiscal outlooks are still decent.
01:46What does that do to investment then in Europe?
01:48What does that do to the AI build-out in CapEx
01:51and the things that are booming elsewhere?
01:53I think it's going to cost us because you need so much, you know,
01:57investment into the new economy, let's put it this way.
02:01And for that, it's true that cheaper borrowing costs
02:03are a definite competitive advantage.
02:05Cheaper energy costs also, cheaper labor costs also,
02:08but somehow, you know, cheaper, I would say,
02:11borrowing costs are a defining factor.
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