LONDON: German government bond yields hovered around 2013 highs on Thursday, with investors reluctant to push them higher for now, wary of how central banks might react to a rise in market interest rates.
Ten-year German yields have risen 13 basis points so far this week after data showed the euro zone economy recovered from a lengthy recession in the second quarter and business surveys suggested the outlook was improving as well.
The data also pushed money market rates higher, however, a move which some analysts say may create discomfort within the European Central Bank, which said in July it wanted to inject a "downward bias" on interest rates.
Its pledge to keep official rates at record lows for a prolonged period or even cut them further is now being questioned by the market, which is pricing out chances of rate cuts in the foreseeable future.
"Core bond (yields) are quite high in their range and shorter-term rates are also close to year-to-date highs, which could be a risk for the ECB meeting," said Alexander Wojt, fixed income analyst at Nordea in Stockholm.
"They might react to the fact that forward guidance hasn't quite worked out for them."
He said, however, any surprise in upcoming US data could see yields breaking this year's range. Inflation, industrial output, jobless claims and the Philly Fed business index are among key releases in the United States later in the day.
Ten-year German yields were flat at 1.81 percent. A rise above 1.853 percent would push them to the highest level since April 2012.
Bund futures were last 3 ticks lower on the day at 140.92, having hit seven-week lows of 140.56 on Wednesday.
Weaker-than-expected US July producer prices data on Wednesday fuelled doubts about Federal Reserve plans to scale back its $85 billion monthly stimulus programme. St. Louis Fed President James Bullard said late on Wednesday the Fed risked pushing inflation even lower if it tapered bond purchases too aggressively.
A Reuters poll released on Wednesday showed a majority of economists expect the Fed to pare bond purchases at its Sept. 17-18 policy meeting.
Comments
Comments are closed for this article.