Economic news

German Yields Edge Lower as a Bond Selloff Eases

MILAN, Sept 29 (Reuters) - German bond yields edged lower on Wednesday tracking moves in U.S. borrowing costs, which eased overnight as low bond prices attracted traders after an auction showed solid demand.

Bond yields on both sides of the Atlantic have risen since the U.S. Federal Reserve last week gave the latest clues on tapering its asset purchases and hiking interest rates.

St. Louis Federal Reserve President James Bullard added momentum to the bond sell-off on Tuesday by cautioning that high inflation may require more aggressive steps from the central bank, including two interest rate hikes in 2022.

U.S. borrowing costs fell in early London trade, with the 10-year Treasury yield down 2.5 basis points to 1.5%.

Germany’s 10-year government bond yield fell 0.5 basis points to -0.205%.

“Bunds are not immune” to a recent repricing of global inflation and rates expectations in the United States, Commerzbank analysts told clients.

They added Bunds were outperforming versus other European government bonds as well as verus U.S. Treasuries and UK Gilts.

Italian bond prices - which move inversely with yields - outperformed core bonds on Wednesday after underperforming during a recent sell-off, with 10-year BTPs falling 2 basis points to 0.838%.

Investors will focus on central bank speakers on the second day of the Sintra online forum featuring a high-level policy panel late on Wednesday.

The recent rise in yields “is almost entirely driven by the increase in inflation” expectations Unicredit analysts said.

“It is difficult to see heavy rhetorical interventions (by central bankers). This would also imply that the trend towards higher yields might continue in the short-term,” they said.

Citi analysts saw a possible slowdown in European Central Bank (ECB) asset purchases) this week, citing “some recent seasonality seen for the last week of the month”.

As part of its quantitative easing programme, the ECB accelerated its money printing, buying a net 26.420 billion euros ($30.86 billion) of assets last week, above the 21.544 billion euros it purchased a week earlier, it said on Tuesday.

(Reporting by Stefano Rebaudo, editing by Barbara Lewis)

Source: Reuters


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