Eurozone bond yields rise as rush to safe havens abates

LONDON: Borrowing costs across the euro area rose on Wednesday, pulling away from multimonth lows hit the previous day, as a sense of calm crept back into European markets.

Long-dated sovereign bond yields in the United States and Europe have fallen 6-7 basis points (bps) this week as a surge in COVID-19 variants adds to a sense that economic growth has now peaked and that any pick-up in inflation will prove transitory.

But the fast and furious moves of the past few sessions appeared to abate for now.

European stocks rallied more than 1 per cent, while US Treasury yields rose 5 bps in London trade.

Those moves rippled into European bond markets, where Germany’s 10-year Bund yield reversed early falls.

It was last trading 2 bps higher on the day at -0.40 per cent. It had fallen to more than five-month lows on Tuesday at -0.44 per cent.

“The moves had gone too far,” said Jan von Gerich, chief analyst at Nordea. “Markets have a tendency of doing that, but it’s dangerous to say it’s over for now until we see more of a stabilisation.”

Across the euro area, bond yields were 1-3 bps higher on the day. Germany’s 30-year debt yield was up 3 bps at 0.08 per cent , having fallen to within striking distance of 0 per cent on Tuesday.

Earlier, Germany sold 1.23 billion euros of 30-year bonds.

As bond markets sold off and oil prices recovered some ground ater sharp falls earlier this week, euro zone inflation expectations also recovered.