Euro zone bond yields edge down, Italy's new issuance in focus (updated)
07/04/2021 10:55
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
(Updates throughout, adds EZ data, Italy 50-year news)
By Dhara Ranasinghe
LONDON, April 7 (Reuters) - Euro zone bond yields nudged
down on Wednesday, with southern European debt stabilising after
a sell-off the previous session as markets braced for new supply
from Italy and Portugal.
Italy on Wednesday started the process of selling new
50-year and 7-year bonds via a syndicate of banks, having
flagged the new issues the previous day. Portugal also said on
Tuesday it planned to sell a new bond via a syndicate of banks.
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The tone across euro zone debt markets was largely subdued,
with most 10-year bond yields down 1-2 basis points (bps) on the
day following an overnight fall in U.S. Treasury yields.
"Overall, the pull higher from U.S. rates is alive and well
and the rebound in euro zone bond markets is largely technical
and temporary in nature," said senior ING rates strategist
Antoine Bouvet.
Germany's 10-year Bund yield was last down 1.5 bps at -0.33%
DE10YT=RR , down from recent highs around -0.26%.
IHS Markit's euro zone Services Purchasing Managers' Index
(PMI) rose to 49.6 in March from February's 45.7, higher than a
flash estimate of 48.8 and only just shy of the 50 mark that
separates growth from contraction. urn:newsml:reuters.com:*:nZRN001KDT
The euro zone economy is on course for a robust recovery in
the second half of the year that could allow the European
Central Bank to start phasing out its emergency bond purchases
in the third quarter, Dutch central bank chief Klaas Knot said.
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The ECB is expected to release monthly data on its
conventional asset purchases and the bi-monthly breakdown of its
pandemic emergency bond purchases later.
Italy's 10-year bond yield was last down 1.6 bps at 0.69%
IT10YT=RR , having risen sharply on Tuesday as investors braced
for new supply. The gap over German Bund yields held just above
100 bps DE10IT10=RR .
Analysts said bond spreads were moving back into focus,
especially after a decision by the German constitutional court
last month to stop the ratification of the European Union's
Recovery Fund prompted investors to price some risk back into
peripheral bonds.
"The Tesoro's (Italian Treasury'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," said Michael Leister, head
of interest rate strategy at Commerzbank, referring to Tuesday's
market moves.
"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."
(Reporting by Dhara Ranasinghe. Editing by William Maclean and
Mark Potter)
((Dhara.Ranasinghe@thomsonreuters.com; +442075422684;))