Euro zone Bond Yields Rise after Fed Tapering Hint


May 20 Reuters Euro zone government bond yields rose on Thursday, catching up with a rise in U.S. Treasury yields after the U.S. Federal Reserve hinted at a possible shift in policy.

Minutes of the U.S. central banks April meeting released on Wednesday said a number of policymakers thought if the U.S. economy continued its rapid progress, it would be appropriate at some point to begin discussing tapering bond purchases.

In the euro area, where bond yields tend to be closely correlated with U.S. Treasuries, yields ticked up in early trade, though by less than U.S. Treasury yields rose following the minutes.

The German 10year yield, the benchmark for the bloc, was up almost 2 basis points to 0.093.

Euro area bonds have underperformed U.S. Treasuries in April and May, with yields on the former rising as the blocs vaccinations accelerate, while a rise in U.S. Treasury yields that spooked markets earlier on in the year has lost steam.

That has tightened the closely watched gap between 10year U.S. and German bond yields to 176 basis points, from over 200 bps in early April.

Although questions around when the European Central Bank will slow its pandemic bond purchases continued to weigh on bonds on Thursday, DZ Bank rates strategist Andy Cossor said European investors will look at the ECB and know it is not in the same position as the Fed.

All the recent policy talk from the ECB has not been in the same direction as the Fed, so European investors can be a bit more…


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