Euro zone bond yields rise as traders wait for inflation data

Euro zone government bond yields picked up on Monday as traders waited for the latest inflation data from the bloc, after European Central Bank President Christine Lagarde raised the prospect of an interest rate hike later in the year. Yields move inversely to prices. Euro zone inflation data was due at 0900 GMT.

Euro zone government bond yields picked up on Monday as traders waited for the latest inflation data from the bloc, after European Central Bank President Christine Lagarde raised the prospect of an interest rate hike later in the year. Germany's 10-year government bond yield, the bloc's benchmark, was up 4 basis points at 2.491%. Yields move inversely to prices.

Euro zone inflation data was due at 0900 GMT. The release comes after the ECB raised interest rates to 3.75% last week and said that any future moves would be dependent on the price data. "There could be a further hike of the policy rate or perhaps a pause," Lagarde told France's Le Figaro newspaper in an interview published on Sunday. "A pause, whenever it occurs, in September or later, would not necessarily be definitive."

Germany's two-year bond yield, which is sensitive to interest rate expectations, was last up 4 bps at 3.237%. "Lagarde stressed, among others, two important inflation readings... between now and the next decision in September," said Rainer Guntermann, rates strategist at Commerzbank. "Today will already bring the first one."

Economists expect euro zone inflation cooled to 5.3% year-on-year in July from 5.5% in June. They see core inflation, which strips out energy and food prices, slowing to 5.4%, also from 5.5%. Italy's 10-year bond yield was last up 3 bps at 3.728% on Monday.

The gap between Italy and Germany's 10-year yields - which is seen as a sign of investor sentiment towards the euro zone's more indebted countries - fell 2 bps to 163 bps. Investors were also still digesting the Bank of Japan's tweak to its monetary policy last week, which will allow the 10-year bond yield to rise to 1%.

Japanese investors hold large amounts of foreign debt, and some analysts worry they might reduce their exposure to Europe if higher rates make domestic investments more attractive. The yield on Japan's 10-year government bond rose to 0.612% on Monday, its highest level in nine years.

 

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