Euro zone bond yields fall, Italy awaits new 50-year bond
07/04/2021 08:24
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, April 7 (Reuters) - Euro zone bond yields fell on
Wednesday, with southern European debt markets stabilising after
a selloff the previous session as markets braced for new supply
from Italy and Portugal.
Italy said on Tuesday it would sell a new 50-year bond and
re-open a seven-year bond, while Portugal said it would sell a
10-year bond. The new issues, to be sold via a syndicate of
banks, could come this session, analysts said.
They noted that the announcement from Italy came as a
surprise to markets, pushing 10-year yields almost 7 basis
points higher on Tuesday as investors sold existing bonds to
make way for new supply.
In early Wednesday trade, benchmark 10-year yields were
lower across the board. Italy's 10-year yield was down around
2.3 bps at 0.68% IT10YT=RR , although the gap over German Bund
yields held 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 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," said Michael Leister, head of interest
rate strategy at Commerzbank.
"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 overnight fall in U.S. Treasury yields helped push euro
zone bond yields broadly lower.
Germany's 10-year Bund yield was last down 2.5 bps at -0.34%
DE10YT=RR .
Focus turned to the release of final PMI data for the euro
area as well as new releases for Spain and Italy.
The European Central Bank meanwhile is expected to release
monthly data on its conventional asset purchases and the
bi-monthly breakdown of its pandemic emergency bond purchases on
Wednesday, followed by the minutes for its March meeting on
Thursday.
Minutes from the latest U.S. Federal Reserve meeting are due
out later in the day.
(Reporting by Dhara Ranasinghe, Editing by William Maclean)
((Dhara.Ranasinghe@thomsonreuters.com; +442075422684;))