LONDON, July 23 — Bond investors are bracing for a slew of data next week that will give them some of their first clues about the state of the euro-zone economy in the wake of the Brexit vote.

They’ll be looking particularly closely at the economic reports after policy inaction by the European Central Bank (ECB) on Thursday failed to provide them with direction.

Yields on German 10-year bunds, the region’s benchmark government securities, held around zero per cent all week.

While they climbed to a month-high after the central bank’s meeting, they soon pared their jump and ended the week with a small decline.

Advertisement

German business confidence in July kicks off the week on Monday, with economists surveyed by Bloomberg predicting a deterioration.

In a report due next Friday, annual euro-area inflation is forecast to have languished at just 0.1 per cent this month. Confidence in the economy, industry and the business climate are all expected to be worse in July — which, strategists say, may spur the ECB to boost monetary stimulus sooner rather than later, and support bonds.

“If we have evidence that Brexit uncertainty is having a negative impact on the euro-area economy, I think we’ll have growing expectations of additional ECB action at some point,” said Elia Lattuga, a fixed-income strategist at UniCredit SpA in London.

Advertisement

“This should support the performance of all European government bonds.”

Benchmark debt

German 10-year bund yields dropped four basis points, or 0.04 percentage point, this week to minus 0.03 per cent as of the 5pm London time close yesterday.

That’s the smallest move since the UK decision to quit the European Union about a month ago.

The price of the zero per cent security due in August 2026 was at 100.30 per cent of face value.

The 10-year yield reached a record-low minus 0.205 per cent on July 6 amid speculation Brexit would hurt global growth.

The ECB kept interest rates and quantitative easing unchanged at its meeting on July 21. And though President Mario Draghi stressed his “readiness, willingness, ability” to boost stimulus in coming months, he said the Governing Council didn’t discuss specific instruments.

The relative inertia before and after that announcement wasn’t confined to Germany’s bonds.

Italian 10-year debt yields dropped two basis points in the week to end yesterday at 1.23 per cent.

Spanish securities saw more movement, though the 11 basis-point drop in their yields did little more than wipe out the previous week’s increase. — Bloomberg