July 3, 2014 / 8:22 AM / in 4 years

Euro zone bond yields edge up before U.S. payrolls, ECB

* Market ratchets up U.S. jobs data bets after strong ADP
    * Rise in euro zone bond yields tempered ahead of ECB
    * Spain to sell up to 4.5 billion euros in bonds before
data, ECB

    By Emelia Sithole-Matarise
    LONDON, July 3 (Reuters) - Euro zone bond yields rose on
Thursday as investors positioned for what may be a strong
non-farm payrolls report after robust private sector data
pointed to a strong recovery in the U.S. labour market.
    Economists expect U.S. employers to have added 212,000 jobs
in June, down slightly from 217,000 in May, according to a
Reuters poll. 
    Some market participants were betting on a higher figure
after Wednesday's ADP National Employment Report showed
companies hired 281,000 workers in June, above predictions of
    German 10-year yields, the benchmark for euro
zone borrowing, rose 1.5 basis points to 1.30 percent, extending
Wednesday's rebound from near historic lows. Other euro zone
bond yields were 1-3 bps higher, though traders said activity
was tempered by caution ahead of the European Central Bank's
monetary policy decision later in the day. 
    "Clearly after yesterday's ADP report the market sold off
and yields pushed higher and this persists this morning and the
market is gradually expecting a stronger NFP.
    "We also have the ECB press conference at the same time ...
so there could be more volatility in the market than a clear
    The U.S. data is due at 1230 GMT, just as ECB President
Mario Draghi starts his post-meeting press conference.
    The ECB is expected to hold off on further monetary stimulus
measures after cutting interest rates to record lows last month
and announced a 400 billion euro loan programme for banks. 
    Market focus will be on details of the ECB's four-year loan
scheme, which is supposed to be contingent on banks lending the
money to the wider economy rather than investing in government
bonds as they did with crisis loans they got in 2011-2012.
    Investors will also parse Draghi's comments to see how far
back policymakers have pushed the possibility of asset purchases
to support the euro zone's anaemic economic recovery.
    "If his words are interpreted by the market as suggesting
that QE is further away than the market is expecting, it could
have some impact," said Elwin de Groot, senior market economist
at Rabobank.
    Among peripheral euro zone bonds, Spanish yields were 1
basis point higher as investors prepared for an
issue of five-year bonds. 
    Madrid aims to raise up to 4.5 billion euros from the
auction of the new paper and a reissue of 30-year bonds, both of
which are seen faring well as the ECB's ultra-easy policies
continue to support investor demand for the region's weaker

 (Editing by John Stonestreet)
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