Eurozone bonds set for biggest weekly rise in over a month

LONDON: Eurozone government bond yields were on track for their biggest weekly gain since mid-april, driven by optimism about the US debt ceiling and strong economic data.

Germany’s 10-year bond yield, the benchmark for the eurozone, was last up 7 basis points (bps) at 2.48 per cent. It has risen 22 bps since Monday, the biggest increase since the week ending April 14.

Investorshadboughtgovernmentbonds-pushing their yields lower - due to fears about the US debt ceiling stand-off.

Yet a commitment from Democrats and Republicans this week to strike a deal on raising the $31.4 trillion borrowing limit, and avoid default, has improved the mood in markets.

“There are more hopes now that it could be solved so that is boosting sentiment and liting rates, and also affecting stock markets,” said Jussi Hiljanen, head of European rates strategy at lender SEB. The US S&P 500 stock index has risen 1.79 per cent so far this week. Europe’s Stoxx 600 was up 0.76 per cent for the week as of Friday.

Italy’s 10-year yield was 4 bps higher on Friday at 4.345 per cent, puting it on track for a weekly increase of 13 bps.

Germany’s 2-year yield, which is sensitive to interest rate expectations, was up 3 bps at 2.822 per cent, the highest since May 2. It has risen 16 bps this week. Strong economic data has helped to push up bond yields, and has caused some central bankers to publicly make the case for more rate hikes.

US jobless claims fell more than expected last week and the Philadelphia Fed’s manufacturing business survey for May also beat expectations, data showed.