Euro Zone Bond Yields Rise as Kazaks Brings up Slower Bond Buying

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May 7 Reuters Euro zone bond yields rose on Friday as a European Central Bank policymaker drew attention to the possibility of the bank slowing its pandemic stimulus next month.

The ECB can decide to reduce the pace of its emergency bond purchases PEPP in June if borrowing costs remain low, policymaker Martins Kazaks, the governor of Latvias central bank, said in a Bloomberg interview.

The ECB accelerated the pace of PEPP buying for the second quarter at its March meeting to hold down a rise in bond yields. It will have to revisit that decision in June.

Kazaks said he thought the bank would certainly discuss increasing its conventional bond purchases if the inflation outlook keeps to the current forecast when PEPP expires.

Germanys 10year yield, the benchmark for the region, was up 2 basis points to 0.22 at 0816 GMT.

Yields on Italian debt, a leading beneficiary of the PEPP programme which has recently underperformed given the uncertainty, were up over 2 basis points to 0.90.

The story this morning that caught quite some headlines are really nothing new, said Piet Christiansen, chief analyst at Danske Bank. As markets reacted to this, it seems like markets really want to catch the absolute start of the tapering of net purchases discussion that eventually will happen this year.

Kazaks comments on increasing conventional bond purchases were more interesting, Christiansen said.

Elsewhere, traders are waiting for employment data out of the United States at 1230…

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