*Euro Zone Periphery Government Bond Yield tmsnrt.rs/2ii2Bqr
MILAN, Sep 29 (Businesshala) – German bond yields eased on Wednesday tracking moves in US borrowing costs as low bond prices attracted traders after showing solid demand after an auction that eased overnight .
Bond yields have risen on both sides of the Atlantic as the US Federal Reserve last week provided the latest clues on reducing its asset purchases and raising interest rates.
St. Louis Federal Reserve Chairman James Bullard spurred bond sales on Tuesday, warning that higher inflation could require more aggressive steps from the central bank, including two interest rate hikes in 2022.
US 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%.
Analysts at Commerzbank told clients that “the Bunds are not immune” to global inflation and the recent reassessment of rate expectations in the United States.
He said the bonds were outperforming other European government bonds as well as US 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 BTP 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 Wednesday.
The recent increase in yields is “almost entirely driven by an increase in inflation” expectations, UniCredit analysts said.
“It is difficult to see the heavy rhetoric (by central bankers) intervention. This would also mean that the trend of higher yields may continue in the short term,” he said.
Citi analysts saw a potential slowdown in European Central Bank (ECB) asset purchases this week, citing “some recent seasonality seen in the last week of the month”.
As part of its quantitative easing programme, the ECB ramped up the printing of its money, buying net assets worth 26.420 billion euros ($30.86 billion) last week, up from 21.544 billion euros bought a week ago, this Tuesday. Said to (Reporting by Stefano Rebaudo, Editing by Barbara Lewis)