March 1, 2019 / 11:41 AM / 9 months ago

CORRECTED-UPDATE 3-German Bund yields set for biggest weekly jump in over a year

(Corrects ratings agency to Moody’s from S&P, deletes reference to S&P rating)

* German Bund yield up 9 bps this week

* Worst fears about economic outlook, political risks ease

* Bund selloff reflects broader selling in US, UK bonds

* Inflation in euro zone still subdued

* Euro zone periphery govt bond yields

By Dhara Ranasinghe

LONDON, March 1 (Reuters) - Germany’s long-dated government bond yields touched 0.2 percent for the first time in almost a month on Friday and were set for their biggest weekly jump in over a year, reflecting easing concern about the global growth outlook and political risks.

Data showing underlying inflation in the euro area remains subdued prevented a deeper sell-off in euro zone bond markets.

At the same time, the bloc was unable to escape the upward pull in yields in other major markets as investor pessimism about the global growth outlook and political risks receded.

“Essentially everyone was in the camp that there was doom and gloom, especially in Europe,” said Peter Schaffrik, global macro strategist at RBC Capital Markets.

“What we’re getting now is a stabilisation in the data, the PMIs for instance are not that bad, nor is the political situation.”

Germany’s 10-year bond yield rose to 0.21 percent , its highest in over three weeks — a move that coincided with U.S. 10-year Treasury yields rising to 2.74 percent, also their highest since early February.

Data on Thursday showed that the U.S. economy slowed less than expected in the fourth quarter, easing concerns that a recession may be around the corner. China’s factory activity contracted for a third straight month in February but at a slower pace, data on Friday showed.

In addition, developments in Britain appear to have removed the immediate threat of disorderly exit from the European Union on March 29, pushing British gilt yields sharply higher.

German 10-year bond yields are up 9 bps this week and set for their biggest weekly rise since February 2018, leaving the German bond curve at its steepest in three weeks. Long-term market inflation expectations meanwhile are close to 1.50 percent — three-week highs.

British 10-year bond yields have jumped 15 bps this week close to their biggest weekly rise since September 2017. U.S. Treasury yields are around 8 bps higher on the week .

“We see some signs of promise on Brexit, ECB officials have curbed dovish expectations and we had the U.S. data yesterday, so a lot of things are falling into place that paint a less pessimistic picture than before,” said ING senior rates strategist Benjamin Schroeder.

Consumer inflation in the euro zone picked up to 1.5 percent in February, as expected, from 1.4 percent in January.

But underlying inflation, closely watched by the European Central Bank, failed to rise. Price growth excluding food and energy held steady at 1.2 percent, well short of the ECB’s near 2 percent inflation target.

“Inflation could be one of the things that could be better but it’s not picking up substantially,” said BBVA bond strategist Jamie Costero.

Most euro zone bond yields were a touch higher. Greek 10-year yields fell to 3.64 percent, their lowest level in over a year, before a Moody’s ratings review.

Commerzbank said an upgrade could encourage Greece to come to the market next week with a new 10-year bond.

Reporting by Dhara Ranasinghe; Editing by Alison Williams and Toby Chopra

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below