Investors switch massively from American bonds to European ones — Deutsche Bank

According to strategists at Deutsche Bank AG, investors will increasingly redirect capital flows from US bonds to Europe. This development aligns with the accelerating policy of "de-dollarization."

Jem Keltek, Head of the Bank's Strategy Group, estimates that 25% of capital flows will be reallocated from investment-grade dollar-denominated debt to other markets. This translates to $9.3 billion monthly, with European credit markets capable of absorbing approximately half this volume, as outlined in the bank's report. Strategists further predict investors will continue reducing their exposure to the dollar and US assets. The primary drivers of this shift include the US government's domestic market focus and the country's growing budget deficit.

For euro-denominated investment-grade bonds, average monthly inflows of 3.9 billion euro ($4.6 billion) would represent 25% of the average monthly net supply since 2020.