LONDON Oct 6 Europe's benchmark bond yield
edged back below zero on Thursday as investors looked towards
minutes of the European Central Bank's last meeting to soothe
fears over the prospect of it eventually winding down its
bond-buying stimulus programme.
Euro zone yields, including the bloc's top-rated German debt
which is usually seen as a safehaven in times of stress, have
shot higher this week after reports that the ECB might reducing
the scale of its quantitative easing scheme.
Despite a spokesman for the ECB saying the central bank had
not discussed this so-called 'tapering', the mere mention of the
word has rattled markets already questioning whether central
banks can win the battle to boost growth and inflation.
Analysts said this has put sharper focus on ECB minutes due
around 1130 GMT, which could divert attention to further tweaks
to the programme after the governing council set out a review to
ensure its smooth implementation.
"The minutes to be released today may already shed some
light on the possible tweaks being considered," ING's global
head of debt and rates strategy, Padhraic Garvey, said.
Germany's 10-year bond yield edged down 1 basis point to
minus 0.01 percent on Thursday, having touched zero on Wednesday
after a 5 bps surge, according to Reuters data.
Yields touched minus 0.16 percent less than a week ago,
encroaching on a minus 0.20 percent record low hit in July.
Other euro zone yields were a touch lower on Thursday,
steadying after some racked up over 10 bps of rises on
The prospect of a resolution to the crisis swirling around
Germany's biggest lender Deutsche Bank, which faces a chunky
fine from the U.S. Department of Justice viewed as a major drain
on its capital, was also seen settling investor nerves.
Questions over the health of Deutsche Bank loomed large over
the start of the International Monetary Fund and World Bank
annual meetings in Washington, as IMF officials expressed
confidence that German and European authorities were working to
Sources in Berlin said Germany is pursuing discreet talks
with U.S. authorities to help Deutsche secure a settlement over
the sale of toxic mortgage bonds well below the mooted $14
Resolution through a reduced settlement is crucial for
Chancellor Angela Merkel, who faces a federal election next
year. It could be political poison for her government to rescue
a bank that got into trouble through speculating.
Shares in Deutsche Bank rose around 2 percent to
12.3 euros on Thursday, having fallen below 10 euros for the
first time ever last week.
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Analysts said there may be scope for yields to fall further
after France and Spain complete bond auctions on Thursday
France is scheduled to sell up to 7.5 billion euros of
long-term bonds, including a 50-year bond, while Spain will
issue bonds due in 2021, 2026 and 2037 as well as an
index-linked bond maturing in 2021.
(Editing by Raissa Kasolowsky)