German 10-year yield touches 3-week low; Italian 10-year yield hits record low
- Benchmark German 10-year government bond yields touched a three-week low, while the rest of the market moved by around 1 basis point.
LONDON: Euro zone government bond yields were slightly lower on Monday as traders focused on expected European Central Bank efforts to tame the effect of the novel coronavirus on the continent's economy and address the low inflation numbers.
Benchmark German 10-year government bond yields touched a three-week low, while the rest of the market moved by around 1 basis point.
ECB members last week warned about the risks of tolerating a long period of weak inflation, so traders' focus on Monday will be on the harmonised flash November inflation numbers for Germany at 1300 GMT.
ING analysts said in a note to clients that "the ECB looks set to add substantially to its stimulus being faced with stubbornly low inflation".
"In absolute terms we are just shy of our 10-year yield target of -0.6pc, but the ECB commitment to containing sovereign funding costs and avoiding a premature steepening of the curve keep us from seeing rates moving materially higher just yet," they said.
German 10-year Bund yield was flat at -0.586pc, after hitting -0.598pc, its lowest since Nov. 9. The rest of the core market was also relatively calm.
In the peripheral markets, Italian 10-year BTP touched a new record low 0.552pc and was last trading flat at 0.558pc.
Yields were left unchanged after flash Italian inflation numbers for November came in better than expected.
The spread between German and Italian yields - essentially the premium Italy pays for its debt - was close to its narrowest for this year, trading last at 114 bps.
Portuguese 10-year government bond yields moved further away from zero, last trading flat at 0.023pc.
They got really close to zero last week and on other trading platforms even broke in negative territory.
Investors will also be looking for the U.S. November jobs report and the ISM indices this week, but ING analysts warned that "given lockdowns and curfews kicking in, especially the jobs data, could be old news already".
"Sentiment will likely be driven more by the potentially accelerated COVID dynamics after Thanksgiving gatherings," they said.
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