Eurozone bond yields dip with focus on Eurozone inflation reading

By: Gannicus Oliver
Gannicus Oliver
Gannicus Oliver is an author, consultant, digital economy enthusiast and investor. He boasts over three years of bonds, real… read more.
on Sep 2, 2020
  • Eurozone periphery government bonds yields dipped by just 0.2%.
  • European inflation readings are the main focus currently.
  • 10-year German bond increased briefly to its highest since early June at -0.372% in early trade.

Eurozone bonds yield dipped from recent highs in early trade on Tuesday, 1 September 2020; it follows Germany’s reading for August.

According to Reuters’ poll, the information showed an inflation reading with just a decline of about 0.2%, although we could see more dip into the negative territory.

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The data followed Germany’s reading on Monday, and it showed consumer prices declining for the first time in more than four years, which spurred a little shake in the market.

Eurozone inflation readings became the main focus this week after the U.S Federal Reserve announcement

Eurozone inflation readings were the main focus after an announcement last week by the U.S Federal Reserve that it would begin to target an average of 2% inflation for specific periods instead of using an annual target figure. Notwithstanding, this announcement declined the yield curves both in Europe and in the United States.

UniCredit analysts gave their opinion being,

“Investor focus on break-even is likely to remain high in light of the ongoing discussion on whether the recent Fed move to average inflation targeting will put pressure on other central banks to follow. In this respect, note that break-even inflation in the eurozone has risen comparatively less than it has in the US.”

Germany and Eurozone inflation readings will watch subsequent week

Commerzbank’s head of charges and credit score analysis, Christoph Rieger, also told clients:

“Right now’s first indications for euro inflation throughout August from France ought to underscore the central banks’ challenges in reaching their inflation targets.”

Besides, he added after mentioning the inflation expectations:

“With this, euro break-evens at pre-crisis ranges maintain drawback potential, and we nonetheless see higher worth in shopping for Bund dips above -0.4% 10-year yields.”

It is essential to know that German’s 10-year bond increased briefly to its highest since early June at -0.372% in early trade.

The recent dip has continued to raise some market concerns. The 10-year bond dipped by one basis point to -0.41%, thus trailing down from its recent highs following the U.S Federal Reserve announcement. Some analysts see the rise in market inflation expectations as unsustainable.

Germany plans to sell 600 million euros of inflation-linked bonds throughout 2026 and 2046 in the primary market, and market experts say that it could take effect with an announcement. On the other hand, Italian bond yields also increased to its highest in June at around 1.17% in early trade, but it was dipped by three basis points recently to 1.13%.

Isabel Schnabel, a bond member of the European Central Bank, stated that the Eurozone has no reason to add to its stimulus measures. Germany and Eurozone readings will closely observe the coming weeks for changes.

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