AIRLINK 74.00 Decreased By ▼ -0.25 (-0.34%)
BOP 5.14 Increased By ▲ 0.09 (1.78%)
CNERGY 4.55 Increased By ▲ 0.13 (2.94%)
DFML 37.15 Increased By ▲ 1.31 (3.66%)
DGKC 89.90 Increased By ▲ 1.90 (2.16%)
FCCL 22.40 Increased By ▲ 0.20 (0.9%)
FFBL 33.03 Increased By ▲ 0.31 (0.95%)
FFL 9.75 Decreased By ▼ -0.04 (-0.41%)
GGL 10.75 Decreased By ▼ -0.05 (-0.46%)
HBL 115.50 Decreased By ▼ -0.40 (-0.35%)
HUBC 137.10 Increased By ▲ 1.26 (0.93%)
HUMNL 9.95 Increased By ▲ 0.11 (1.12%)
KEL 4.60 Decreased By ▼ -0.01 (-0.22%)
KOSM 4.83 Increased By ▲ 0.17 (3.65%)
MLCF 39.75 Decreased By ▼ -0.13 (-0.33%)
OGDC 138.20 Increased By ▲ 0.30 (0.22%)
PAEL 27.00 Increased By ▲ 0.57 (2.16%)
PIAA 24.24 Decreased By ▼ -2.04 (-7.76%)
PIBTL 6.74 Decreased By ▼ -0.02 (-0.3%)
PPL 123.62 Increased By ▲ 0.72 (0.59%)
PRL 27.40 Increased By ▲ 0.71 (2.66%)
PTC 13.90 Decreased By ▼ -0.10 (-0.71%)
SEARL 61.75 Increased By ▲ 3.05 (5.2%)
SNGP 70.15 Decreased By ▼ -0.25 (-0.36%)
SSGC 10.52 Increased By ▲ 0.16 (1.54%)
TELE 8.57 Increased By ▲ 0.01 (0.12%)
TPLP 11.10 Decreased By ▼ -0.28 (-2.46%)
TRG 64.02 Decreased By ▼ -0.21 (-0.33%)
UNITY 26.76 Increased By ▲ 0.71 (2.73%)
WTL 1.38 No Change ▼ 0.00 (0%)
BR100 7,874 Increased By 36.2 (0.46%)
BR30 25,596 Increased By 136 (0.53%)
KSE100 75,342 Increased By 411.7 (0.55%)
KSE30 24,214 Increased By 68.6 (0.28%)

Euro zone government bond yields edged higher but stayed significantly below their multi-year highs as concerns about systemic risk and economic slowdown drove investors to lower bets on terminal rates.

Lingering hopes of a less aggressive monetary policy stance are likely to fade if inflation keeps surprising on the upside and the economy shows some strength.

Meanwhile, a sharp rate rise from New Zealand’s central bank is a reminder that major central banks remain in monetary tightening mode.

Germany’s 10-year yield, the benchmark of the bloc, rose 3 basis points (bps) to 1.92%. It reached its highest since end-November 2011 on Tuesday last week at 2.35%.

Euro zone yields rise on inflation angst, gilt pressure fades

“The bond rally will need another relay of ‘good’, understand ‘bad’ from the point of view of the economy, news to keep its momentum going,” ING analysts said. Investors will focus on PMI data later in the session.

Activity in Spain’s services sector contracted in September for the first time since January.

The European Central Bank must at the very least stop stimulating the economy through its monetary policy, the ECB’s President Christine Lagarde said on Tuesday, in a likely reference to raising interest rates back to “neutral” territory.

Neutral is a level of interest rate that neither stimulates nor curbs economic growth, all else being equal.

“While central banks are reiterating the importance of data dependency, one still has the impression that realised inflation is key, and with current levels of 10%, it is hard to believe European government bonds will continue their bull run over the next few days,” UniCredit analysts said.

They also recalled that market-based inflation expectations have fallen substantially.

A market gauge of long-term inflation expectations was at 2.13% on Tuesday, close to its lowest since end-July hit on Monday at 2.06%.

Bond yields in the euro area declined from their multi-year highs last week while euro zone inflation data hit 10.0% in September, a new record high.

Italy’s 10-year government bond yield rose 5 bps to 4.24% on Wednesday, with the spread between Italian and German 10-year yields at 230 bps.

Analysts flagged that subsiding quantitative tightening risks and talk about more European Union joint issuance should support spreads.

Two top EU officials on Tuesday called for joint borrowing to help the 27-nation bloc navigate the energy crunch, which would support heavily-indebted countries.

Some analysts quoted media sources saying the ECB governing council will begin discussions on shrinking its balance sheet during Wednesday’s non-monetary policy meeting.

Comments

Comments are closed.