Israel-Iran tension: why markets do not react and the demand for bonds increase
Arnaud Mounier, head of fixed -income business development at Alliance Bernstein, points out that the reaction of financial markets before the escalation of the conflict between Israel and Iran has been surprisingly moderate. Interest rates in both the United States and Europe have barely varied, and credit differentials have not shown significant movements. The only asset that has registered notable changes has been oil. This, in his opinion, indicates two things: first, that investors are little exposed to risk and do not need to get rid of positions against geopolitical news; And second, that bond demand remains strong, as evidenced by the high volume of new emissions in Europe.
Regarding the United States credit qualification reduction by Moody's last month, Mounier states that, although there is a lot of debate about diversifying investments outside the US market, in practice a clear action has not been observed in that regard. The participation of foreign investors in the American Treasury bond auctions remains similar to that of previous months. However, it highlights a trend in some domestic investors, to prefer local assets due to the recent weakness of the dollar against other currencies such as the euro, the Swiss Franco and the Japanese yen.
