US long-term yields have risen in recent months on expectations of strong economic growth fueled by fiscal stimulus. Eurozone long-term government yields have followed this movement in a limited way, as Eurozone economies have been hit hard by the Covid-19 crisis. The pandemic has increased economic fragmentation across European countries, putting pressure on the ECB to pursue its highly accommodative policy.
Against such a backdrop, European insurers’ search for yield for their fixed income portfolios is tricky. Moreover, diversification needs are ever more relevant today, since investors have already significantly expanded the euro credit share of their investments, leading to risk limit saturations on the main European issuers.
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