Euro zone bond yields edge up as equity markets calm

Expectations of higher growth and inflation, predominantly driven by the U.S. stimulus programme, have pushed bond yields higher on both sides of the Atlantic this year. Yellen said later that she does not anticipate inflation would be a problem for the U.S. economy and any price increases would be transitory.

Reuters | Updated: 05-05-2021 14:03 IST | Created: 05-05-2021 14:03 IST
Euro zone bond yields edge up as equity markets calm

Euro zone bond yields edged up on Wednesday as equity markets recovered from a sudden slump a day earlier that had sent yields on the safe-haven assets falling sharply. Stock markets fell 0.5% on Tuesday in a matter of minutes and further afterwards, leaving traders perplexed as to what was behind the move.

That was followed by U.S. Treasury secretary Janet Yellen's comments that rate hikes may be needed to stop the economy overheating as a vast stimulus programme boosts growth, which predominantly hit equity markets, but also cut the fall in bond yields. Expectations of higher growth and inflation, predominantly driven by the U.S. stimulus programme, have pushed bond yields higher on both sides of the Atlantic this year.

Yellen said later that she does not anticipate inflation would be a problem for the U.S. economy and any price increases would be transitory. With European equity markets opening higher on Wednesday, bond yields, which move inversely with prices, edged up in early trade.

Germany's 10-year yield, the benchmark for the region, was up 1 basis point to -0.22% at 0824 GMT, below its highest since March 2020 hit at -0.162% on Monday. "I expect the (yield) curves in the eurozone and the U.S. to steepen, driven by better equity markets and ahead of the ADP and NFP print which should be supportive for the inflationary thesis," said Sebastien Galy, senior macro strategist at Nordea Asset Management, referring to U.S. employment data due later this week.

In the primary market, Greece launched a new five-year bond via a syndicate of banks, while Germany re-opens a five-year bond via auction. Greece's deal comes after a rating upgrade by S&P in April, to BB. There is scope for a further upgrade given the positive outlook on the rating, now two notches below investment-grade, increasing the likelihood of Greece's return to the investment-grade ratings it lost during its debt crisis a decade ago.

Commerzbank analysts expect Greece will raise 2.5 billion euros, while Reuters reported last week that it will raise another 4 billion euros from two bond issues this year. On the data front, April services sector PMIs showed activity in Spain expanded for the first time since July, while it continued to contract in Italy. The euro zone composite PMI, which covers both manufacturing and services, rose more than initially estimated.

The U.S. ISM services PMI is due later on Wednesday.

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


TRENDING

OPINION / BLOG / INTERVIEW

Blockchain in Healthcare: Opportunities and challenges

The use of blockchain in healthcare is a relatively new innovation with many of its uses still being explored and related technologies being developed, improved, and scaled. ...

Debate surrounding vaccine passports and development misses bigger picture

... ...

Blockchain vs IOTA: Looking for a better alternative

... ...

For stability, Iraq needs to crack down on corruption

... ...

Videos

Latest News

Venezuela's academy of medicine asks U.S. to donate COVID-19 vaccines

Venezuelas main academy of medicine has asked the United States to add the South American nation to its international donor list for millions of doses of COVID-19 vaccines, despite a political freeze between the two countries. Enrique Lopez...

China's 'relatives policy' emerging as part of broader crackdown crackdown on Uyghurs

Chinas 2016 relatives policy, where Chinese government cadres are sent to live, work and sleep with families to promote national harmony in the country, has emerged as a major constituent of a broader crackdown on Uyghurs and other ethnic m...

Malaysia declares nationwide lockdown as COVID-19 cases spike

Malaysia on Monday imposed a new nationwide lockdown, as the country grapples with a surge in coronavirus cases and highly infectious variants that the government said are testing its health system.The new measures come just ahead of this w...

US condemns rocket strikes by Palestine on Israel, calls on both sides to de-escalate tensions

The United States on Monday local time condemned the barrage of rocket attacks by Palestine on Israel, saying it recognises Israels legitimate right to defend itself. Speaking at his daily press briefing, US State of Department spokesperson...

Give Feedback