Euro zone Bond Yields Dip ahead of PMIs, Eurogroup

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May 21 Reuters Euro zone bond yields dipped on Friday ahead of key business sentiment surveys and a meeting of the blocs finance ministers, while analysts watched whether a rally which began on Thursday marked stability for the asset class.

Bonds have come under pressure from recent data pointing to improving economic prospects and potentially higher inflation and flash May purchasing manager indexes PMIs for the euro area will offer the latest clues on that front.

The PMIs are expected to show a slight slowdown in manufacturing growth in the euro zone and an acceleration in services growth, with the composite figure covering both also expected to show accelerated growth, according to a Reuters poll.

All eyes will be on whether capacity constraints risk derailing the recovery, and on inflation, ING analysts told clients. Given that EUR rates are still in the initial phase of their recoveryinduced rise… we see a strong skew in favour of higher rates still.

Germanys 10year yield, the benchmark for the region, was down 1 basis point to 0.12 at 0650 GMT.

Italys 10year yield was unchanged at 1.06, after a sharp drop on Thursday.

Focus is also on euro zone finance ministers, who will discuss on Friday how to make sure the pandemic does not leave lasting economic scars that could divide the monetary union. European Central Bank President Christine Lagarde is also expected to speak.

The meeting comes as analysts are watching to see whether a rally in peripheral debt…

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