Euro zone government bond yields tick down after BoE

It was up 4 bps before the BoE. The German 10-year yield had fallen for four straight sessions until Wednesday, after nonfarm payrolls (NFP) data on Friday showed the U.S. jobs market slowed in April, boosting expectations that developed economy central banks will cut interest rates.

Euro zone government bond yields slightly pared their earlier gains after the Bank of England left rates unchanged but took another step towards easing its monetary policy. The BoE said its Monetary Policy Committee voted 7-2 to keep rates at a 16-year high of 5.25%, and Governor Andrew Bailey said he was "optimistic that things are moving in the right direction". It was widely expected to hold rates at 5.25%.

Euro zone bond borrowing costs rose for a second day on Thursday, retracing some of the recent fall spurred by weaker-than-expected U.S. data. Germany's 10-year bond yield, the benchmark for the euro zone bloc, rose 3 basis points (bps) to 2.50%. Yields move inversely to prices. It was up 4 bps before the BoE.

The German 10-year yield had fallen for four straight sessions until Wednesday, after nonfarm payrolls (NFP) data on Friday showed the U.S. jobs market slowed in April, boosting expectations that developed economy central banks will cut interest rates. "I do not think that today's sell-off is related to any specific events or news," said Emmanouil Karimalis, European rates strategist at UBS. "In my view, it is more of a correction, following the strong rally after the NFPs."

Sweden's Riksbank cut rates on Wednesday in a sign that Europe's central banks are prepared to diverge from the U.S. Federal Reserve, which is expected to hold rates until September or November. Traders expect the European Central Bank to lower rates in June, according to money market pricing, with inflation running at 2.4% in April and growth tepid.

Italy's 10-year yield was 4.5 bps higher at 3.84%, and the gap between Italian and German yields widened 2 bps to 135 bps. On Wednesday, Austrian central bank Governor Robert Holzmann, who typically favours higher interest rates, said he sees "no reason...to cut key interest rates too quickly, too strongly".

He added that the ECB would be influenced by the Fed, given the importance of the dollar in the global financial system. Data on Thursday showed that China's exports and imports returned to growth in April after contracting in the previous month.

In the first quarter, the United States overtook China as Germany's most important trading partner, according to Reuters' calculations.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)