Euro zone bond yields slip after PMIs, shrug off Lagarde speech

• Germany's benchmark 10-year bond yield declined nearly three bps to -0.35pc, down nearly 2 bps for the week.
• Italy's 10-year bond yield shifted off highs and was broadly flat at 1.29pc, after being up 3 bps in early trading.

LONDON: Core European government bond yields edged lower on Friday after data showed euro zone business growth almost ground to a halt this month while activity in the dominant services industry rose at a much weaker pace than expected.

IHS Markit's flash composite Purchasing Managers' Index, seen as a reliable guide to economic health, was 50.3, down from October's 50.6 and creeping towards the 50 mark separating growth from contraction.

After a relatively lacklustre week in regional debt markets, driven by headlines related to U.S.-China trade relations, the focus returned to the euro zone economy.

"The PMIs were a bit of a mixed bag, some elements were constructive and others disappointing," said Andy Cossor, rates strategist at DZ Bank.

"If you take the euro zone as a whole, manufacturing was a bit better but the services sector was weaker, which on balance is a sign of an economy that is not firing on all cylinders."

Analysts said a speech by new European Central Bank President Christine Lagarde did not offer any new hits on the monetary policy outlook, while continuing to stress the need for fiscal policy to play a greater role.

Her maiden address failed to move bond markets, with ING strategists saying it met expectations that she could become the leading economic and political voice for Europe rather than  quickly shaking up the ECB.

Lagarde did not discuss monetary policy in her first major address since becoming ECB president at the start of this month, merely saying the central bank would do continue to do its part to support the euro zone economy.

After broadly holding steady in early trading, European government bond yields edged lower.

Germany's benchmark 10-year bond yield declined nearly three bps to -0.35pc, down nearly 2 bps for the week.

Italy's 10-year bond yield shifted off highs and was broadly flat at 1.29pc, after being up 3 bps in early trading.