2024-01-10 09:12:39
Euro zone government bond yields took a break on Wednesday, interrupting this year’s upward trend, as traders watch remarks from European Central Bank policymakers for clues on when they will start reducing interest rates.
The yield on German 10-year bonds fell about 1 basis point to 2.18%.
The euro zone’s benchmark yield fell by around 80 basis points in November and December, but rose by more than 15 basis points in January as traders began pricing in significant rate cuts. share of major central banks in Europe and the United States in 2024 due to slowing inflation, then, this year, they reassessed these forecasts.
The probability that the European Central Bank will cut interest rates in March is now around 40%.
Such a move was fully evaluated at the end of December, but the feeling that prices had gone too far, combined with higher-than-expected employment data in Europe and the United States, prompted operators to reevaluate their position.
The abundance of supply has also weighed on bond prices, which move inversely to yields.
The main event of the week that could lead to a major reassessment of the timing of interest rate cuts is the release of US consumer inflation data, scheduled for Thursday, and markets are somewhat on hold until this date.
“Today’s data calendar is certainly not very extensive. The only thing that is more interesting (is) the French industrial production readings for the month of November,” DZ bank analysts said in a morning note to customers.
They added that remarks from several ECB policymakers would be “also interesting.”
ECB board member Isabel Schnabel, considered the most influential voice in the conservative camp of policymakers, will lead an online question-and-answer session at 2:00 p.m. GMT. Schnabel’s remarks to Archyde.com in early December contributed to markets pricing in rate cuts.
ECB Vice President Luis de Guindos said earlier on Wednesday that the slowdown in euro zone inflation was expected to stop at the start of the year.
Italy’s 10-year yield fell 3 basis points to 3.82%. Like its German counterpart, it rebounded slightly in 2024 after falling to leave the gap between German and Italian yields at 162 basis points.
Germany’s two-year yield rose a fraction to 2.61% and Italy’s fell 3 basis points to 3.18%.
Separately, trade body ICMA said on Wednesday that central banks will need to intervene more frequently in government bond markets.
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