To say that Quantitative Easing in the Eurozone did not have its desired effect would not be a fair statement. True, it has taken a while to infiltrate into the wider economy, but over the past six months or so we are finally beginning to witness a more robust economic recovery in the single-currency region.

Economic data has been resilient. Unemployment data has been creeping lower and has recently fallen to its lowest in almost eight years.

Inflationary data has also been slowly ticking upwards, with the European Central Bank revising its forecast for inflation upwards to for 2018 and 2019. We are also fresh from what has been yet another surprising earnings season whilst manufacturing and services data, as measured by PMIs have also surprised to the upside.

Though it had been announced earlier, April marks the month whereby the ECB’s monthly asset purchase programme is scaled lower to €60bn from €80bn, though ECB’S Draghi acknowledged that the recovery is gaining ground, reiterating however that inflation is “not yet self-sustaining enough to justify an end of extraordinary monetary support.”

Nevertheless there has been a clear shift in investor sentiment and aura surrounding the prospects of the Eurozone economy.

Having said that, the reduction in the monthly asset purchases need not necessarily mean that it is the start of the end of the multi-year longer period of accommodative monetary stance from the ECB, but is a clear signal that an important corner has been turned, and this has been reflected in the sharp downward reversal in government bond prices in the single currency region since September 2016, and subsequent rise in yields.

There has been some form of positive performance of late within the European Government bond market in the wake of the possible increase in volatility and shift in risk aversion brought about by the busy elections calendar in Europe this year.

But, if there are no great surprises in the French elections, we would expect the risk-on mode to slowly gather steam once again leading into a gradual uptick in government bond yields once again, as the robustness in the European economic recovery remains supported with a string of expected positive economic data releases.

During the month of March, the aggregate Maltese Government Bond Market declined by 0.42%, and is up by 0.31% so far this month (till 13th April), almost perfectly mirroring the performance of the BoAML Euro Government Bond Index, and we expect Malta Government Bonds to continue to mirror the performance within the European government bond market, over the longer term.

This article was issued by Mark Vella, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt .The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.