FRANKFURT, May 5 ― Euro zone bond yields edged up today as equity markets recovered from a sudden slump a day earlier that had sent yields on the safe-haven assets falling sharply.
Stock markets fell 0.5 per cent yesterday in a matter of minutes and further afterwards, leaving traders perplexed as to what was behind the move.
That was followed by US Treasury secretary Janet Yellen's comments that rate hikes may be needed to stop the economy overheating as a vast stimulus programme boosts growth, which predominantly hit equity markets, but also cut the fall in bond yields.
Expectations of higher growth and inflation, predominantly driven by the US stimulus programme, have pushed bond yields higher on both sides of the Atlantic this year.
Yellen said later that she does not anticipate inflation would be a problem for the US economy and any price increases would be transitory.
With European equity markets opening higher today, bond yields, which move inversely with prices, edged up in early trade.
Germany's 10-year yield, the benchmark for the region, was up 1 basis point to -0.23 per cent at 0711 GMT, below its highest since March 2020 hit at -0.162 per cent on Monday.
"I expect the (yield) curves in the eurozone and the US to steepen, driven by better equity markets and ahead of the ADP and NFP print which should be supportive for the inflationary thesis," said Sebastien Galy, senior macro strategist at Nordea Asset Management, referring to US employment data due later this week.
In the primary market, Greece is expected to launch a new five-year bond after hiring a syndicate of banks yesterday.
The sale comes after Greece's rating upgrade by S&P in April, to BB. There is scope for a further upgrade given the positive outlook on the rating, now two notches below investment-grade, increasing the likelihood of Greece's return to the investment-grade ratings it lost during its debt crisis a decade ago.
Commerzbank analysts expect Greece will raise €2.5 billion (RM12.35 billion), while Reuters reported last week that it will raise another €4 billion from two bond issues this year.
Germany will raise €4 billion from the re-opening of a five-year bond via auction, while it is meeting investors ahead of a 30-year green bond issue this month.
On the data front, investors will watch April services sector PMIs from Spain and Italy, alongside final euro zone readings, and the US ISM services PMI is due later today. ― Reuters
