Euro zone yields stay low on ECB stimulus expectations

LONDON: German 10-year Bund yields traded near two-week lows on Friday amid expectations for further monetary stimulus from the European Central Bank, while Portugal's 10-year government bond yields were close to breaking below zero.

The ECB committed in October to further easing in December, which has underpinned euro zone government bonds in recent weeks.

The moves have been muted since bonds recovered from a sell-off on optimism around coronavirus vaccines.

Dovish comments by ECB chief economist Philip Lane on Thursday regarding inflation and the minutes of the bank's October meeting added to expectations of more stimulus.

The benchmark German 10-year government bond yield last traded at -0.586pc, not far from the two-week low of -0.592pc it reached on Monday.

Yields across other core markets and peripheral markets were also little changed. Portugal's 10-year government bond yield last traded at 0.015pc, after dropping as low as 0.007pc the day before.

Portugal's 10-year yield was close to breaking into negative territory for the first time on Refinitiv and already had on Bloomberg and Tradeweb.

The 10-year yield was trading higher on Friday compared with Thursday, traders said.

"I wouldn't be surprised if there's been a little bit of profit-taking from people that own the bonds," said Andy Cossor, rates strategist at DZ Bank in Frankfurt. "They've had a good run and coming into month-end, you're heading into the quietest month, December."

"I would say that fund managers are convinced that zero, or very close to it, is the floor for Portuguese yields," Cossor said.

Traders will be looking for the final reading of the euro zone consumer confidence survey, due at 1000 GMT. Economists polled by Reuters see no change for November.