Pissed off Eurozone bond markets push yields higher | Money


The yield on two-year German bonds ― which rose above 0% yesterday for the first time since 2014 ― rose 5 basis points to 0.008%, just off the previous day’s high. —Photo Reuters

LONDON, March 30 ― Eurozone government bond yields rose today, pushed back to multi-year highs by inflation worries after a see-saw session the previous day.

The news that consumer prices in the German state of NRW rose 2.7% month-on-month in March and 7.6% year-on-year has kept bond markets on edge amid soaring inflation.

Rate strategists at Commerzbank said the figure adds weight to expectations of a “major upside surprise” in the national inflation figure due out later in the session.

At the start of trading, short-term bonds continued to drive up the burden of borrowing costs.

The yield on two-year German bonds ― which rose above 0% yesterday for the first time since 2014 ― rose 5 basis points to 0.008%, just off the previous day’s high.

Other short-term bond yields in the Eurozone rose 4 to 6 basis points on the day.

The benchmark 10-year German Bund yield rose 2.5 basis points on the day to 0.66%, near four-year highs hit yesterday.

In a highly volatile session, bond yields soared yesterday, with bullish headlines about talks to end the war in Ukraine, exacerbating bond selling. But yields fell sharply from their highs later in the day.

Rabobank rates strategist Lyn Graham-Taylor said it was becoming increasingly difficult to understand what was driving bond markets as investors tried to assess what an eventual end to the conflict would mean for investors. outlook for the economy and inflation.

“The outlook is very confusing and it’s hard to get a sense of what the market is trading on, and I don’t think we’re alone,” he said.

“The brief reversal in the US curve is also getting a lot of attention.”

The closely watched 2-year/10-year US Treasury yield curve briefly inverted yesterday for the first time since September 2019, with bond investors betting that aggressive tightening by the Federal Reserve would raise recession risks for the US. American economy.

The Fed raised rates by a quarter point earlier this month and announced more significant measures to control inflation.

This spread was just under 4 basis points at the start of London trade, keeping reversal territory in sight. ― Reuters

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