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Focus on Supply as Italy Sells New 20-Year Bond

AMSTERDAM, Sept 8 (Reuters) - Euro zone bond investors were set to focus on supply on Tuesday, while attention remained on the European Central Bank’s policy decision due later in the week.

Bond sales are in focus, after Italy started selling a new 20-year bond via a syndicate of banks.

UniCredit analysts expect it will raise between 6 and 8 billion euros, which would take Italy’s progress of funding to 77% of their target amount for this year.

Italy’s 10-year bond yield was unchanged at 1.12%. The risk premium it pays for 10-year debt over safe-haven Germany, rising in recent weeks, is at 158 bps, its highest in a month.

“Doubts about the ECB’s dovish stance, and the pick-up in rates volatility have weakened buyers’ resolve,” analysts at ING told clients, adding that any disappointment at the European Central Bank’s meeting on Thursday would mean pressure remains on Italian bonds for the time being.

In auctions, Austria is scheduled to sell 1.15 billion euros of bonds due 2030 and 2034, and the Netherlands will issue 1.5 to 2.5 billion euros of a bond due 2028.

There was also focus on the European Central Bank’s weekly bond purchase data released late on Monday ahead of the bank’s meeting on Thursday. The data showed the bank’s bond buying remained subdued last week as analysts were waiting to see whether it picks up again after the summer lull.

“The data confirm that the ECB can take it easy as long as market conditions are relaxed, controlling average yield levels and spreads with subdued volumes,” Commerzbank’s head of rates and credit research Christoph Rieger told clients.

Executive board member Isabel Schnabel told Reuters in late August that the lower purchase volumes reflected “seasonality patterns”, but also improved market conditions.

Investors will also be focusing on the euro zone’s final gross domestic product reading for the second quarter due at 0900 GMT.

German exports rose by 4.7% in July, data published on Tuesday showed, signalling economic recovery from the pandemic continues at the bloc’s leading economy, but shipments remained below their pre-crisis level.

German 10-year bond yields were down 1 basis point to -0.47%.

Reporting by Yoruk Bahceli, editing by Ed Osmond

Source: Reuters

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