February 23, 2024

Eurozone Bond Yields Shed Ahead Of CPI Data Upload

Bond yields for Euro zones dived on Thursday as markets await US’s September CPI data. Also, borrowing costs took a breather and lowered ahead of the report. 

Bond Yields Fall As CPI Report Drops

The producer Price Index for August showed signs of strength upon its release in September. But the latest readings depict lowness. Goods prices show a feeble projection in almost two and a half years. 

Worries about Britain’s gilt firmness affected bond prices which slid afterward. That followed Andrew Bailey’s message to pension funds. He announced Friday as the deadline for concerned individuals to rectify all balancing inconsistencies. 

After this, BoE will wrap its bond-purchase support program. But the Financial Times release indicated the possibility of an extension. The report said central bankers motioned chances of furthering the scheme to lenders.  

Investors now have their eyes peeled against the CPI update. A computation of inflation anticipation level jumped to its highest since May. According to the figures, it spiked by 2.3 percent. 

Meanwhile, the Euro Short-Term Rate (ESTR) outlook in November 2023 revealed a surge of 3.1 percent. On Wednesday, the ten-year ticker of Germany’s bond yield hits its highest after August 2011. It gained 2.423 percent. 

However, it shed two basis points on Thursday, coming down to 2.32 percent. Thursday’s CPI report will be the last before November’s FOMC meeting. 

Some analysts opined that Fed might not alter its 75 basis points stand. So, signals that inflation might be peaking would trigger further aggression. 

CPI Impact On Treasuries

Economists gave an overview of how CPI data would affect the US reserve. According to an analyst, higher-than-expected figures may impact Treasuries negatively. Fixed-income securities would also bear the brunt of it. 

ECB representatives commented on possible Euro zone bond reactions. They signaled the possibility of more increase in Euro zone bond yields. 

Furthermore, Christine Lagarde shared an update on quantitative tightening. The ECB President said a deliberation to authorize it is in motion. A Commerzbank analyst said investors are waiting until ECB reaches a compromise.

He added that the ECB is likely at the end of the long line of bond buyers. Moreover, Lagarde has affirmed that the bank is considering endorsing quantitative tightening. 

Klaas Knot, Governor of Dutch’s central bank, shared on Wednesday how he believes ECB would attain neutrality. According to him, the bank needs to hike interest rates twice more to touch the neutral rate. Meanwhile, that may still be insufficient. 

Also, the bank would need to enter the restrictive zone. 

On Wednesday, the Federal Reserve secretary read the minutes of September’s two-day policy meeting. It says in the note that the Fed is looking to imbibe a more limiting policy. Adopting this will make for an extended presence of restrictive legislation. 

The ten-year note of Italy’s bond yield smashes its highest level since February 2013. Then, it gained 4.927 percent. On Thursday, it dived, losing 3.5 basis points, falling to 4.76 percent.

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