Latest News

Euro zone bond yields rise as German inflation flares; UK gilts flag

Euro zone bond yields rise as German inflation flares; UK gilts flag By Reuters

Breaking News

‘;

Economy 11 minutes ago (Sep 29, 2022 16:21)

© Reuters. FILE PHOTO: 20 Euro banknotes are seen in a picture illustration, August 1, 2016. REUTERS/Regis Duvignau/Illustration/File Photo

By Stefano Rebaudo and Amanda Cooper

LONDON/MILAN (Reuters) – Euro zone government bond yields rose on Thursday, unwinding most of the previous day’s gains, after German inflation data reignited investor concerns over yet more interest-rates rises.

Meanwhile, UK bond holders resumed their selling of gilts after the Bank of England (BoE) stepped in on Wednesday to stabilise the market in light of a surge in yields.

Euro area yields fell sharply, echoing the strength in the gilt market, after the BoE’s decision to launch of an emergency bond-buying programme gave fixed income investors some relief from what has been an otherwise relentless drop in prices this year.

Analysts were cautious about the BoE measures, arguing that to restore markets’ confidence, the British Treasury needs to announce a credible plan to get debt under control.

Germany’s 10-year government bond yield, which serves as a benchmark for the euro zone, rose 5 basis points (bps) to 2.20%. It hit its highest since December 2011 at 2.35% on Wednesday and is on track for a rise of 87 bps in the three months to September. This would be its biggest quarterly rise since early 1990, according to Refinitiv data.

The UK 10-year gilts were last up 12 bps at 4.13%, after having dropped almost 50 bps the day before.

“Markets calmed down after the BoE stepped in. However, the BoE move, without a change in political direction, might not be a turning point on its own,” Chris Attfield, European rates strategist at HSBC (LON:HSBA), said.

More immediately, data on Thursday showed German inflation was at its highest in over a quarter of a century in September, driven by soaring energy prices, even before the impact of the global power crisis fully hits during the winter months.

“Given the ECB’s new reaction function, it will underpin the ECB’s ongoing hawkishness,” strategists at ING, led by Padraig Garvey, said of the expected read of German consumer prices.

“Markets, however, are showing more signs of concern over systemic stresses as monetary policy reins are further tightened across the globe. After the UK episode the implied volatilities in rates markets remain at record levels,” they said.

Next up are inflation numbers for the broader euro zone, which are due on Friday.

European Central Bank policymakers continued to signal they would support another big interest rate hike given how strong inflation is, but differed on whether it was time to think about mopping up cash from the economy.

“Markets are pricing a high probability of two ECB rate hikes of 75 bps by year-end, and we are inclined to agree with that. The hawks are in control, and the real question is what will happen next year,” HSBC’s Attfield argued.

Italian government bonds slightly underperformed those of Germany after sources told Reuters ECB policymakers see no need to step in and buy more of the country’s debt to keep the market stable after a right-wing coaltion won a general election.

Italy’s 10-year government bond yield rose 8 bps to 4.65%, having hit its highest since February 2013 the previous day, when it reached 4.927%.

The premium of Italian 10-year yields over those of Germany widened several basis points to around 245 bps, from a low of 232 bps earlier on.

Euro zone bond yields rise as German inflation flares; UK gilts flag

Maersk CEO see ‘modest’ pick-up in trade for holiday seasonBy Reuters – Sep 29, 2022

By Jacob Gronholt-Pedersen and Terje Solsvik COPENHAGEN (Reuters) -A.P. Moller-Maersk’s chief executive said on Thursday he expects a “modest” pick-up in trade for the upcoming…

Scale of UK’s market slide spells out home truthsBy Reuters – Sep 29, 2022

By Andy Bruce and Vincent Flasseur LONDON (Reuters) – This week’s plunge in UK financial assets accelerated a longer historic decline signalling a loss of confidence among…

Russian central bank gives legal entities green light to trade foreign sharesBy Reuters – Sep 29, 2022

MOSCOW (Reuters) – The Bank of Russia on Thursday said legal entities will be permitted to buy the securities of “unfriendly” issuers, those from countries that have imposed…

Our Apps



Terms And Conditions
Privacy Policy
Risk Warning

© 2007-2022 Fusion Media Limited. All Rights Reserved.

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.

What's your reaction?

Excited
0
Happy
0
In Love
0
Not Sure
0
Silly
0

You may also like

More in:Latest News

Leave a reply

Your email address will not be published. Required fields are marked *