Eurozone yields fall ahead of ECB meeting

MILAN: Eurozone government bond yields fell on Monday ahead of Thursday’s policy meeting of the European Central Bank (ECB), while concerns about the Delta variant of the coronavirus curbed the appetite for risk.

In self-isolation ater Britain’s health minister tested positive with the virus, Prime Minister Boris Johnson ended more than a year of restrictions in England and put his faith in vaccines. Meanwhile, Australia and some Asian countries extended restrictions.

ECB policymakers are set for a showdown as they chart a new policy path amid disagreements on how much more stimulus, mainly in bond purchases, is needed.

Germany’s 10-year bond yield was down 2 basis points, ater hiting a fresh lowest since March 26 at -0.376 per cent.

German 10-year real yield fell 0.5 bps, ater seting its lowest since August 2019 at -1.686 per cent.

The borrowing cost of the European Union bond issued in June was down 1.5 basis points, hiting an all-time low at -0.119 per cent.

The phase-out of the Pandemic Emergency Purchase Programme (PEPP), which will end in March 2022, and possible changes in the Asset Purchase Programme (APP) were expected to hold the centre stage in the next few days and probably weeks.

“ECB President (Christine) Lagarde’s remark that the PEPP unwind may be followed by a transition into a new format is already causing speculation to run wild in some quarters ahead of the Thursday meeting,” DZ Bank analysts said.