Euro zone yields near recent lows, traders focus on U.S.

"It's definitely a good barometer of how much of a squeeze there is in the bond market, especially in the long-dated bond markets," Antoine Bouvet, senior rates strategist at ING, said of the 30-year yield turning negative. Citing European Central Bank data released on Monday, he noted that the average maturity of public sector debt the bank holds under its Pandemic Emergency Purchase Programme exceeds that of the universe of eligible bonds for the first time, putting downward pressure on longer-dated yields.


Reuters | Updated: 03-08-2021 15:59 IST | Created: 03-08-2021 15:59 IST
Euro zone yields near recent lows, traders focus on U.S.

Euro zone bond yields edged up from recent lows on Tuesday as traders eyed moves in U.S. Treasuries and data across the Atlantic. Bond yields ticked up globally on Tuesday after falling on Monday, when data from the Institute for Supply Management showed U.S. manufacturing slowed in July for the second straight month. U.S. 10-year Treasury yields, which fell below the critical 1.20% level in the previous session, rose back to 1.20% on Tuesday.

Bond yields move inversely with prices. Germany's 10-year yield, the benchmark for the euro zone, which is closely corelated to U.S. Treasuries, rose from the lowest since early February on Tuesday and was up less than a basis point to -0.47% by 1013 GMT.

Its 30-year yield, which turned negative and sent the whole German yield curve into negative territory on Monday, was hovering around 0%. "It's definitely a good barometer of how much of a squeeze there is in the bond market, especially in the long-dated bond markets," Antoine Bouvet, senior rates strategist at ING, said of the 30-year yield turning negative.

Citing European Central Bank data released on Monday, he noted that the average maturity of public sector debt the bank holds under its Pandemic Emergency Purchase Programme exceeds that of the universe of eligible bonds for the first time, putting downward pressure on longer-dated yields. The data also showed that the ECB bought roughly 1.5-times more debt from Italy, Germany, France and Spain than their net issuance in June and July.

With little data coming out of the euro zone, focus was on June factory and durable goods orders data out of the U.S. due at 1400 GMT. Given a quiet week, euro zone bonds are "very much beholden to what's going to happen in the U.S.," ING's Bouvet said.

In the primary market, Austria raised 1.3 billion euros from the auction of bonds due 2025 and 2031. ($1 = 0.8423 euros)

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

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