Eurozone bond yields are near multi-week lows

Article content

LONDON – European government bond yields were mostly near multi-week lows on Monday, as the market remained supported by investor expectations that central banks will raise rates less aggressively and fears of a slowdown in economic growth sent investors to safer assets.

The European Central Bank will raise interest rates again in December and next year to fight inflation, but those increases may well be smaller than the last ones, Philip Lane, the bank’s chief economist, said in an interview published on Monday.

Article content

Germany’s 10-year government bond yield, a benchmark for the eurozone, was 1.99%, down 3 basis points. It briefly dipped below 2% last week, its lowest since early October, and has fallen from an 11-year high of 2.53% reached in October. 21.

Italy’s 10-year bond yield was at 3.95%, up 4 basis points, after hitting a recent two-month low of 3.86%.

The decline in Italian yields has been greater than that of Germany in early trade, and so the spread between the countries’ 10-year bond yields narrowed to 184.5 basis points (bps), the lowest since May.

“I think we will continue to see yields fall this week,” said Antoine Bouvet, senior price strategist at ING.

“European PMIs are likely to point to a slowing economy, this week’s FOMC minutes are likely to come across more strongly than the very hawkish tone of (Governor Jerome Powell’s) post-meeting press conference, and China’s COVID news, overall, increases risk aversion and therefore pushes yields lower .”

Article content

Powell told a news conference after the Federal Reserve’s FOMC rate-setting meeting in November that even if the pace of interest rate hikes slowed, further hikes were necessary.

While that meeting was ahead of the market’s October inflation numbers, its minutes, released on Wednesday, will still be closely read by investors.

U.S. Treasury yields have fallen since the data showed U.S. consumer and producer price pressures eased for October, fueling speculation that the U.S. Federal Reserve may slow aggressive rate hikes.

The Eurozone Purchasing Managers’ Index (PMI) is also due on Wednesday.

China is battling multiple COVID-19 outbreaks, from Zhengzhou in central Henan province to Chongqing in the southwest as well as in the capital Beijing, which have also roiled stock markets and sent currency traders to the safety of the dollar.

The latest wave is testing China’s resolve to stick with changes it has made to its zero-covid policy, which calls for cities to be more targeted in their containment measures and steer away from widespread lockdowns and testing that have strangled the economy and frustrated residents .

The German 2-year credit decreased by 1.5 points to 2.1% and the two-year credit in Italy increased by 8 points to 2.7%. (Reporting by Alun John; Editing by Mark Potter, Emelia Sithole-Matarise and Andrea Ricci)

Leave a Comment

Your email address will not be published. Required fields are marked *