Euro Bond Yields Fall on U.S Policy Concerns

Euro zone government bond yields fell broadly on Thursday, mirroring a move in U.S. Treasuries, after minutes of the last U.S. Federal Reserve meeting struck a more uncertain tone than the market had expected.

German 10-year bond yields — the euro zone benchmark — fell 2 basis points (bps) to 0.26 percent, while most other euro zone equivalents were down 2-3 bps.

The minutes of the Dec. 13-14 meeting showed many policymakers were considering faster interest rate increases as the economy could grow at a quicker pace because of fiscal stimulus under President-elect Donald Trump’s administration.

But they also spelled out downside risks that could limit economic growth, such as trade barriers, the dollar’s appreciation and uncertainty on fiscal measures.

“‘Wait and see’ remains the best way to describe the Fed’s attitude but the minutes show it is getting concerned that a hotter economy may warrant a less gradual hiking path,” Mizuho’s head of euro rates strategy Peter Chatwell said.

Reuters

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell