Euro zone bond yields calm after inflation sell-off

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Oct 7 (Businesshala) – Euro zone bond yields eased on Thursday as energy prices continued to slide, recovering from a sharp sell-off a day earlier that was driven by inflationary concerns.

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As gas and oil rose on Wednesday, bonds sold off and yields, which move inversely with prices, rose sharply, as already high inflation prior to price hikes pushed market-based inflation sharply higher. Had done it.

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But gas and oil prices fell later on Wednesday, helped by comments from Russian President Vladimir Putin and an unexpected rise in US crude inventories.

Democrats in the US Senate said they may accept a Republican proposal to ease the partisan deadlock that has threatened US loan defaults later in October, helping to calm markets.

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“Bunds are holding their breath after a sharp re-pricing of inflation and rate expectations in recent days,” said Commerzbank strategists Christoph Rieger and Rainer G√ľntermann.

He said the fall in oil and gas futures helped support German government bonds. He said improving risk sentiment due to US growth should ease pressure on Bund yields ahead of Friday’s US employment data.

As of 0712 GMT, Germany’s 10-year yield, the benchmark for the euro area, was unchanged at -0.18%, down from its highest level since the end of June when it hit -0.147% on Wednesday.

Underperforming Italian bonds on Wednesday fell 2 bps to 0.87% with a 10-year yield on Thursday.

This pushed the closely watched gap between 10-year Italian and German bond yields to 104 bps, from Wednesday’s one-week high of 108 bps.

The focus is on the European Central Bank on Thursday, which will release its September meeting accounts at 0930 GMT. Speeches from Chief Economist Philip Lane from 0830 GMT, as well as Executive Board member Isabel Schnabel, will also be seen at 1300 GMT.

Businesshala News reported late Wednesday, citing sources, that the ECB is studying a new bond-buying program to prevent market volatility when its pandemic emergency bond purchase program (PEPP) expires next year. Is.

The potential new program would replace the traditional bond purchases of PEPP as well as the ECB and it would bypass rules that govern how much debt the ECB will buy from each country, the report said. that no decision has been made.

In the primary market, Spain and France will sell long-term loans at auction. (Reporting by Yoruk Bahcelli; Editing by Alison Williams)

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