BNP Paribas stated that bonds of Italy, Greece, Spain and Portugal will continue to have high yields with spreads further subside against the German bund.

These bonds are buoyant from the European Central Bank’s interest rate cuts and liquidity measures taken two weeks ago. Italian and Spanish 10-year yields fell 8 points to 2.77% and 2.68% respectively, within sight of record lows hit last week, while Greek equivalents dropped 13 points to 5.83%. Yields on top-rated euro zone bonds were 5-7 points lower.

German bonds, the euro zone benchmark, unwound some of their outperformance of U.S. Treasuries. The two-year yield gap in favour of Treasuries tightened by 9 points to 34 points.

The spread was still at its widest in seven years, reflecting the policy divergence between the Fed and the ECB. The Fed is trimming its monetary stimulus and is expected to start hiking rates next year while the ECB is set to maintain an ultra-easy policy for years.

For 2014, the economy is predicted to run with 3.2% whereas developed markets will return to a normal pace of development of GDP at 2% from 1.35% in 2013. Nonetheless, the upcoming markets, such as that of China, will note their GDP rates drop to 4.4% in 2014 from 4.6% in 2013.