Germany: investors face uncertainty after election

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Coalition talks to form the first administration, following Merkel’s departure, could take weeks, possibly months to conclude.

According to Reuters, the Social Democrats (SPD) and the conservatives are seeking to lead a new government. Though a so-called “traffic light” coalition between the SPD, Greens, and the liberal FDP is forming . 

If Olaf Scholz, leader of the SPD, uses his slim victory, then the incoming administration may pursue greater European Union integration and a looser fiscal policy in Europe’s largest economy.

Such an outcome could have an impact on Bunds. German bond yields edged down from 2-1/2-month highs, as investors forecast the unlikelihood of a leftist coalition. 

A look at Germany government bond yields by Refinitiv Datastream / Fathom Consulting.

Source: Reuters

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