June 11, 2020 / 7:47 AM / 23 days ago

German yields fall to more than one-week low after Fed

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

By Yoruk Bahceli

AMSTERDAM, June 11 (Reuters) - German government bond yields fell on Thursday, following U.S. Treasuries after the U.S. Federal Reserve signalled it plans years of extraordinary support to counter the economic fallout from the coronavirus pandemic.

All 17 current Fed policymakers see the federal funds rate -unchanged on Wednesday - remaining near zero through next year, and 15 of them see no change through 2022. That contrasts with the 2008/09 global financial crisis, when some policymakers raised a cautionary flag about the need for higher interest rates to guard against inflation.

“We are not even thinking about thinking about raising rates,” Fed Chair Jerome Powell said.

Germany’s 10-year benchmark fell to an eight-day low in early trade at -0.37%, falling 4 basis points on the day . German Bunds followed U.S. Treasuries, which rallied on the Fed meeting and are down around 12 basis points over the last two sessions.

“It’s probably Bunds playing catch-up with the late afternoon Treasury move post the European market close,” said Lyn Graham-Taylor, fixed income strategist at Rabobank.

Southern European bonds, which came under pressure this week from a flurry of chunky issuance, were stable on Thursday, with Italy’s 10-year yield unchanged at 1.52%. Italy is scheduled to sell three-year bonds via auction.

Investors’ focus will be on the euro zone finance ministers’ meeting later in the session for any updates on the European Union’s 750 billion euro recovery fund proposal to help member states’ economies recover from the coronavirus pandemic.

The European Central Bank will do anything possible to ensure that the current crisis is not made worse by a credit crunch, chief economist Philip Lane told Il Sole 24 Ore in an interview. (Reporting by Yoruk Bahceli; Editing by Alex Richardson)

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