LONDON: Euro zone bond yields edged up on Tuesday, kept in check by the US election which could drive significant volatility across global bond markets, as well as other asset classes.
Germany’s 10-year bond yield, the benchmark for the euro zone bloc, rose nearly 2 basis points to 2.41%, a little below last week’s three-month high of 2.447%.
Euro zone bond markets will close well before voting concludes in Tuesday’s US presidential election, but with potentially sharp swings to come when trading begins on Wednesday, investors were nervous about placing large bets.
Market consensus ahead of the election is that a victory by former President Donald Trump would lead to higher US Treasury yields due to his policies pushing inflation and growth higher likely causing a slower place of rate cuts from the Federal Reserve.
Euro zone yields rise after better than expected data
The picture in Europe is more complicated however.
While euro zone bonds have largely tracked moves in the US Treasury market in recent months, if Trump were to impose the heavy tariffs he has threatened on Europe, it could hurt economic growth and push the European Central Bank to accelerate rate cuts, sending yields lower.
Italy’s 10-year bond yield was 1 basis point higher at 3.68%, leaving the gap between Italian and German 10-year yields at 126 bps.
Comments