German Bund yields dip as euro zone industrial output declines


Reuters | Berlin | Updated: 14-04-2021 16:48 IST | Created: 14-04-2021 16:43 IST
German Bund yields dip as euro zone industrial output declines
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Eurozone government bond yields fell on Wednesday as manufacturing and industrial data in the eurozone and Japan pointed towards hurdles ahead as the world recovers from the depths of the COVID-19 crisis. Solid demand for a Treasury auction in the United States also underpinned bond markets.

Eurozone industrial output declined in February after expanding in January, dampening prospects for economic growth in the first quarter, while Japanese machinery orders fell by the most in about a year in February., Eurozone bond yields, which had been rising in line with U.S. Treasury yields on hopes for a strong economic recovery later this year and increased inflation, dropped 1-3 basis points.

"The global picture is that the manufacturing sector is in rude health and is the sector that is leading the recovery, so perhaps there's a bit of a reaction to that," said ING rates strategist Antoine Bouvet. A solid 30-year auction by the U.S. Treasury also prompted a bond relief rally, Bouvet added. U.S. Treasury yields fell and the yield curve flattened on Tuesday in the wake of the sale.

Germany's 10-year bond yield, the benchmark for the single currency bloc, dropped 1.3 basis points to -0.304%, having hit a near two-week high of -0.27% on Tuesday after U.S. inflation data came in slightly above expectations. Other eurozone bond yields were also 1-3 basis points lower on the day.

Ten-year U.S. Treasury yields nudged higher to 1.63%, having dropped nearly 4 basis points late on Tuesday. "The overall picture is for rising yields. Lots of people believe a strong recovery is in the price, but this depends on the Fed's communication - the start of the tapering debate needs to be this year given the potential strength of the recovery," said Bouvet.

Several U.S. Federal Reserve officials are due to speak later on Wednesday.

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

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