Euro zone bond yields fall, Italy awaits new 50-year bond

by akoloy

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LONDON — Euro zone bond yields fell on Wednesday, with southern European debt markets stabilizing after a selloff the earlier session as markets braced for brand new provide from Italy and Portugal.

Italy mentioned on Tuesday it could promote a brand new 50-year bond and re-open a seven-year bond, whereas Portugal mentioned it could promote a 10-year bond. The new points, to be offered through a syndicate of banks, may come this session, analysts mentioned.

They famous that the announcement from Italy got here as a shock to markets, pushing 10-year yields virtually 7 foundation factors larger on Tuesday as traders offered current bonds to make manner for brand new provide.

In early Wednesday commerce, benchmark 10-year yields had been decrease throughout the board. Italy’s 10-year yield was down round 2.3 bps at 0.68%, though the hole over German Bund yields held above 100 bps.

Analysts mentioned bond spreads had been transferring again into focus, particularly after a choice by the German constitutional courtroom final month to cease the ratification of the European Union’s Recovery Fund prompted traders to cost some threat again into peripheral bond markets.

“The Tesoro’s announcement of a new syndicated 50-year BTP caught markets off guard, with 10-year and 30-year (yield)spreads versus Bunds widening up to 7 bps to the highest level in almost a month,” mentioned Michael Leister, head of rate of interest technique at Commerzbank.

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“While thinner Easter liquidity might also play a role, these moves add weight to our tactical shorts in Italy versus semi-core (bonds) and Spain as supply indigestion risk is being compounded by doubts regarding the NGEU (Next Generation EU), the ECB’s resolve and less generous carry differentials.”

An in a single day fall in U.S. Treasury yields helped push euro zone bond yields broadly decrease.

Germany’s 10-year Bund yield was final down 2.5 bps at -0.34% .

Focus turned to the discharge of ultimate PMI knowledge for the euro space in addition to new releases for Spain and Italy.

The European Central Bank in the meantime is anticipated to launch month-to-month knowledge on its standard asset purchases and the bi-monthly breakdown of its pandemic emergency bond purchases on Wednesday, adopted by the minutes for its March assembly on Thursday.

Minutes from the newest U.S. Federal Reserve assembly are due out later within the day. (Reporting by Dhara Ranasinghe, Editing by William Maclean)

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