Euro zone yields nudge up from one-month lows

Several large European countries are also issuing bonds on Thursday, and the morning auctions from Spain and France saw robust demand. Germany's 10-year yield, ⁠rose around 3 basis points in early trading to 2.84% but the euro zone benchmark is still down over 6 bps this week so far.

Euro zone bond yields edged up from one-month lows on Thursday, and yield curves steepened a touch, as this week's rally on cooler than expected ‌inflation data paused, partly due to higher oil prices and stronger producer price inflation. Several large European countries are also issuing bonds on Thursday, and the morning auctions from Spain and France saw robust demand.

Germany's 10-year yield, ⁠rose around 3 basis points in early trading to 2.84% but the euro zone benchmark is still down over 6 bps this week so far. Bond yields move inversely to prices, and Germany's 10-year yield touched a one-month low of just under 2.8% on Wednesday after data showed euro zone ​inflation slowed to 2% last month.

The move lower in oil prices this week has helped strengthen expectations that inflation is under control, ‍supporting bonds. Oil rose on Thursday, nudging yields up. Also in the mix was data showing euro zone producer price inflation rose 0.5% month on month, compared to a Reuters survey of 0.2%, challenging that sanguine view on inflation.

But a European Central Bank survey showed euro zone consumers kept their inflation expectations unchanged in November, predicting a steady slowdown ⁠in price ‌growth towards the ECB's 2% target in ⁠the coming years. CURVE MOVES

Shorter dated bond yields rose less than longer dated yields - Germany's two year yield was just 2 basis points higher at 2.11% - while super long ‍dated 30 year yields rose a touch more than 3 bps to 3.48%. That meant the German yield curve steepened - longer dated bond yields rose more than shorter ​dated ones.

The German yield curve had been flattening slightly in the last few sessions. The market consensus is that curves will steepen ⁠as the Dutch occupational pension system, the European Union's largest, starts transitioning to a new system, adding to pressure on long-term government bonds.

"Market players with long end steepener trades may fear ⁠a similar flattening episode to what we saw last September," said analysts at ING in a note. Curves which steepened sharply in August suddenly flattened in September last year.

"If the flows from Dutch pension funds do not meet expectations, then an unwind ... may accelerate the flattening move," ING added. Moves ⁠in other euro zone bonds were largely in line with the benchmark. France and Italy's 10-year yields were also each up around 2 ⁠bps, with France's at 3.55% and ‌Italy's at 3.50%.

Both France and Italy saw slightly larger increases in 30 year yields, and smaller in 2 year. The large amount of issuance on Thursday was fairly well digested by the market.

France sold 13.5 billion ⁠euros ($15.75 billion) of debt and Spain just over 7 billion euros. ($1 = 0.8569 euros)

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