July 6, 2020 / 10:57 AM / a month ago

UPDATE 2-Southern European bond yields fall as markets pin hopes on economic recovery

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Adds details, updates prices)

By Dhara Ranasinghe

LONDON, July 6 (Reuters) - Southern European bond yields fell on Monday, supported by expectations for hefty central bank stimulus and hopes that the world economy will bounce back quickly from the COVID-19 shock.

Global stock markets rallied to four-week highs as investors bet that a revival in Chinese economic activity would boost global growth, even as surging coronavirus cases delayed business re-openings across the United States.

Data showed orders for German industrial goods rose by 10.4% in May, rebounding from their biggest drop since records began in 1991 the previous month.

The generally upbeat tone in world markets lifted sentiment in lower-rated euro zone bond markets, which analysts said remained bolstered by the European Central Bank’s asset purchase scheme.

Italy’s 10-year bond yield was down 2 basis points in late trade to 1.30% - pushing towards more than three-month lows hit last week. Spain’s 10-year bond yield was down 3 basis points to 0.43%, also near the lowest levels since March.

The European Central Bank’s bond purchases slowed last week, with net purchases under the emergency bond-buying programme PEPP falling to their lowest since the week of April 17, according to Refinitiv IFR data.

That came after a number of EU policymakers recently stressed that the full PEPP purchase envelope may not be used. Analysts said it was important to factor in PEPP redemptions affecting the data.

Safe-haven 10-year German bond yields were unchanged at -0.43%.

In contrast to the German industrial orders data, euro zone retail sales fell in May.

In the near-term, there was little to drive bond markets, said analysts, noting a slowing in new supply this week as well.

“Expectation management and political haggling ahead of next week’s ECB (European Central Bank) meeting and EU summit are unlikely to push Bunds out of their recent ranges,” said Rainer Guntermann, rates strategist at Commerzbank.

“European government bond spreads have scope to tighten as the flow profile improves and light calendars provide a fertile backdrop for opportunistic issuance.”

Orders for Italy’s new “BTP Futura” July 2030 bond reached 2.37 billion euros. The new bond, for retail investors only, will be entirely used to fund measures to help Italy’s economy recover from the coronavirus. Cyprus hired a syndicate of banks to re-open bonds due 2024 and 2040, according to notices from two lead managers seen by Reuters, with each bond due to raise a minimum of 250 million euros. (Reporting by Dhara Ranasinghe; additional reporting by Yoruk Bahceli; Editing by Ed Osmond and Alex Richardson)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below