AMSTERDAM, Feb 18 Reuters Euro zone bonds showed further signs of stabilisation after a hefty selloff driven by expectations of rising inflation, with German yields barely edging up.
Expectations of economic recovery from the COVID19 crisis and extraordinary fiscal stimulus in the United States caused a surge in global bond yields led by U.S. Treasuries in recent sessions.
But, with stock markets weakening on Wednesday, the selloff showed signs of a pause.
In the euro zone, after rising 11 basis points in three sessions to its highest since June 2020, Germanys 10year Bund yield dipped 1 basis point on Wednesday. On Thursday, its yield was up less than a basis point at 0830 GMT at 0.36.
Christian Lenk, rates strategist at DZ Bank, said the pause to the selloff shows some kind of exhaustion with the reflation trade for the time being, although he expects the trade to hold up in the longer term.
Lenk added the Federal Reserve minutes, in which it displayed willingness to steer past coming inflation, may have led to some rethinking of market participants that the inflation trade has run a little too far.
Market focus on Thursday is on the ECB, which is due to release the minutes for its January meeting at 1230 GMT. Comments with the most marketmoving potential would be on how the ECB is to react to a further rise in the euro, ING analysts told clients.
At the meeting in January the ECB kept its policy rate and stimulus package unchecked, but its messaging had been…