November 7, 2017 / 8:43 AM / in 13 days

German Bund yields cling near 2-month lows thanks to ECB data

* ECB discloses forward-looking redemption data for first time

* To have 130 bln euros from maturing bonds to invest

* Data underpins euro zone bond markets

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr

By Dhara Ranasinghe

LONDON, Nov 7 (Reuters) - Germany’s 10-year bond yields held near two-month lows on Tuesday, a day after new data from the ECB confirmed that reinvestment flows from maturing debt will provide considerable support to regional bond markets over the coming year.

The European Central Bank’s decision last month to extend its massive asset purchase scheme until September next year, albeit at a reduced monthly pace of 30 billion euros from January, has helped drive down bond yields in recent weeks.

Data released late on Monday suggests those monthly flows will be closer to 40 billion euros once the ECB reinvests funds from maturing bonds the central bank has acquired under its asset-purchase programme.

Redemptions, disclosed for the first time on Monday, will average 10.8 billion euros a month in the 12 months from November.

”Leaving any smoothing aside for now, this (redemption data)implies that purely from a flow perspective the latest QE extension is closer to “9 times 41 billion euros”, said ING senior rate strategist Benjamin Schroeder.

Germany is expected to receive the largest reinvestment flows because the ECB buys bonds in line with the size of a country’s economy in what is known as the capital key. It is the bloc’s biggest economy and its benchmark bond issuer.

Analysts said the redemption data added weight to the gains in bond markets seen in the wake of the ECB’s October meeting, at which the central bank unveiled its extension in asset purchases.

In early European trade, Germany’s 10-year bond yield was steady at 0.34 percent and within sight of two-month lows hit on Monday. It is down around 16 basis points from a peak hit a day before the ECB meeting on Oct.26.

Most other euro zone bond yields were also flat to a touch lower on the day. Italy’s 10-year bond yield was down 1 basis point at 1.76 percent and within sight of a 10-month low hit on Monday.

In a note, Jefferies senior European economist Marchel Alexandrovich said that redemptions next year would also favour France, Italy and Spain.

ECB chief Mario Draghi is scheduled to speak at an ECB forum on banking supervision later on Tuesday. Other ECB officials expected to speak at the forum include Sabina Lautenschlager.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

Reporting by Dhara Ranasinghe; Editing by Matthew Mpoke Bigg

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