Euro Area Bonds On The Front Foot

Euro-area bonds rose, pushing yields from Belgium to Italy to record lows, as uneven growth in the region and inflation at less than half the European Central Bank’s target boosted the case for more stimulus.

Yields on German 10-year bunds slid to the lowest in 12 months while those on similar-maturity Italian securities reached the lowest on record. Gross domestic product in Italy contracted in the first quarter while German growth accelerated more than economists predicted. Irish 10-year yields dropped to the lowest on record as analysts predicted Moody’s Investors Service will raise the country’s credit rating tomorrow.

“This should be the final nail in the coffin for those who are doubting whether the ECB will do something,” said Jan von Gerich, a fixed-income strategist at Nordea Bank AB in Helsinki. “The market is getting quite sure that the ECB will deliver more easing. Maybe that will weaken the impact to some extent” and limit further declines in yields, he said.

The rate on Belgium’s five-year notes dropped one basis point, or 0.01 percentage point, to 0.72 percent at 11:06 a.m. London time, after being as low as 0.704 percent. The 4 percent security due March 2019 rose 0.03, or 30 euro cents per 1,000-euro ($1,367) face amount, to 115.61.


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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