UPDATE 2-Italian and Greek bonds brace for best session since March
* Eurozone periphery government bond yields tmsnrt.rs/2ii2Bqr (Rewritten everywhere, updates prices)
May 20 (Reuters) – Italian and Greek bond yields were set for their biggest daily declines in more than a month on Thursday, as stock markets recovered from a slump a day earlier.
Eurozone yields driven by riskier southern European bonds fell sharply as stock markets recovered from one of their biggest drops this year on Wednesday, when a cryptocurrency crash hit. hit the riskier assets.
The Italian 10-year yield fell almost 6 basis points on the day at 2:43 p.m. GMT to 1.06%, its biggest daily decline since March 11. Bond yields move in the opposite direction to prices.
Greek 10-year yields fell similarly to 1.03%, also heading for the steepest daily decline since March 11.
Richard McGuire, head of rate strategy at Rabobank, said that while the moves look like risky trade with lower-rated stocks and bonds rallying, a drop in a key measure of inflation expectations and lower oil prices did not support this. view.
A market indicator of long-term Eurozone inflation expectations fell to its lowest level in more than a week below 1.57%.
“(The move) fits the picture of some sort of positioning-related development after the recent enlargement highlighting the value of peripheral debt,” McGuire said.
Eurozone yields rose with southern European bonds, which offer higher yields, underperforming since April amid uncertainty over when the European Central Bank will slow down its purchases of European bonds. pandemic emergency as the bloc’s economic outlook improves with faster vaccinations.
ECB chief economist Philip Lane said on Thursday it had “a lot of work to do” to bring inflation up to 2%.
The German 10-year rate, the block’s benchmark, was unchanged at -0.11% after rising earlier.
The release of the US Federal Reserve report on Wednesday, showing some policymakers considering starting to discuss tapering bond purchases if the US economy continues to grow rapidly, had less of an impact on German bond yields than on US Treasuries.
“European investors will look at the ECB and know that it is not in the same position as the Fed,” said Andy Cossor, rate strategist at DZ Bank.
“Not all of the ECB’s recent political speeches have been in the same direction as the Fed, so European investors may be a little more relaxed about the outlook for monetary policy,” he added.
After sales of syndicated government bonds – where investment banks sell debt directly to end investors – put pressure on bond prices earlier in the week, Thursday’s bid via auction in from Spain and France, with a relatively shorter maturity, was digested more easily. (Reporting by Yoruk Bahceli, additional reporting by Stefano Rebaudo; Editing by Kim Coghill and Susan Fenton)