Get 40% Off
👀 👁 🧿 All eyes on Biogen, up +4,56% after posting earnings. Our AI picked it in March 2024.
Which stocks will surge next?
Unlock AI-picked Stocks

Euro zone bond yields rise from record lows, 30-year leads way

Published 08/19/2019, 07:04 AM
Updated 08/19/2019, 07:04 AM
© Reuters. A trader works at Frankfurt's stock exchange in Frankfurt

By Dhara Ranasinghe

LONDON (Reuters) - Long-dated bond yields in the euro zone shot higher on Monday on the back of a calmer tone in world markets and increased expectations for fiscal stimulus in Germany.

Germany has the fiscal strength to counter any future economic crisis "with full force", Finance Minister Olaf Scholz said on Sunday, suggesting Berlin could provide up to 50 billion euros ($55 billion) of extra spending.

That followed a report on Friday that Germany was prepared to ditch its balanced budget rule and take on new debt to counter a possible recession, pushing bond yields higher.

Firmer sentiment in equity markets and a report that the U.S. Treasury is considering issuing 50 or 100-year bonds also provided an opportunity for bond investors to take profits on recent hefty price gains, analysts said.

Thirty-year bond yields across the single currency bloc were up 9-10 basis points on the day. Germany's 30-year bond yield was on track for its biggest one-day jump since 2017, rising to -0.11% (DE30YT=RR).

Germany's 10-year bond yield was up 4 bps at -0.63% (DE10YT=RR), off record lows around -0.73% hit last week.

"The fiscal spending debate is taking shape so we have an expectation that a swing in supply may come about although we think that's unlikely," said Commerzbank (DE:CBKG) rates strategist Rainer Guntermann.

"There's also a debate about 50-year bond issuance in the U.S., which we've had before, adding to this cocktail is that the market is consolidating after last week."

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Hopes of fresh stimulus measures from major economies have helped soothe global recessionary fears. World stock markets were also cheered by a decision from China's central bank to alter the way it sets a key interest rate benchmark, a move seen by analysts as reducing borrowing costs for companies.

Japanese bond yields nudged away from three-year lows and U.S. Treasury yields rose 5-13 bps.

In Italy unease was also creeping in as Prime Minister Giuseppe Conte gets ready to address the Senate on Tuesday on a government crisis.

Italy's 10-year bond yield was up 10 bps on the day at 1.50% (IT10YT=RR).

The anti-establishment 5-Star Movement said on Sunday that Matteo Salvini, leader of the far-right League, was no longer a credible partner, apparently closing the door on any possibility of resurrecting the ruling coalition.

The League has put forward a motion of no confidence in the government, but 5-Star and the opposition Democratic Party refused to debate it and are discussing forming a coalition among themselves.

"Under the earliest scenario, elections can only happen in November," said Pooja Kumra, European rates strategist at TD Securities. "Markets also expect an easing package from ECB next month so any fall in (Italian) BTPs could be a buying opportunity."

Graphic: Euro zone periphery government bond yields - http://fingfx.thomsonreuters.com/gfx/rngs/WORLD-ECONOMY/010031622MG/index.html

(This story was refiled to add missing word 'yields' in headline)

Latest comments

this is good
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.