AMSTERDAM, July 30 — German government bond yields edged down towards two-month lows today as investor attention turned to inflation and GDP readings in Europe after the Fed left its policy unchanged.
The US Federal Reserve left interest rates near zero yesterday, suggesting hopes for a quick economic rebound are dimming as coronavirus cases rise in a number of states. It repeated a pledge to use its full range of tools for as long as it takes to recover from the pandemic.
Attention turns to economic data releases yesterday, as investors continue to take stock of a potential second wave of coronavirus infections which could put Western economies back in lockdown.
“Data is increasingly important now that the market has now come to terms with a second wave,” Mizuho analysts said.
Germany’s GDP reading is due at 0800 GMT. A Reuters poll expected an 11.3 per cent decline year-on-year.
July inflation readings from German states, also due at 0800 GMT, are in focus before the national readings later in the session — expected to show inflation fall to 0.4 per cent year-on-year, from 0.8 per cent in June.
ING analysts watching the inflation data noted Greek ECB policymaker Yannis Stournaras’ assertion that the trajectory of the bank’s emergency bond purchases will depend mostly on the inflation outlook.
“To be clear, it would take a strong outsized upward surprise for them to terminate the programme early but a soft print would be perceived as adding to the case for more stimulus,” they said.
Euro zone sentiment indices due at 0900 GMT will also be watched.
Germany’s 10-year yield was down 1 basis point to -0.51 per cent in early trade, nearing two-month lows at -0.52 per cent hit yesterday.
Italian 10-year yields were unchanged at 1.06 per cent.
In the primary market, Italy is scheduled to re-open five and 10-year bonds via auction. — Reuters
