German Government Bond Yield Falls, Fed in the Background

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MILAN, June 18 Reuters German bond yields edged lower on Friday, tracking moves in U.S. borrowing costs, and analysts expect the adverse reaction of euro zone bond prices to a hawkish policy meeting of the Federal Reserve this week to prove shortlived.

The U.S. curve flattened after an initial spike in yields on Thursday, as some investors appeared to have been caught flatfooted by the Fed comments. Investors who had been betting on yield curve steepening after the Fed statements scrambled to cover those trades.

The U.S. 10year government bond yield was down 1.5 basis points at 1.5 in early London trade.

The eurozone government market will be in a waitandsee mode today, with an eye on U.S. Treasury yields, said Andrea Ponti, cohead of fixed income portfolio management at Kairos Partners.

But after yesterdays bond selloff, the focus is shifting to the ECBs ultradovish stance, with investors not forecasting any bondbuying tapering discussion before the fall, he added.

Germanys 10year government bond yield fell 1 basis point to 0.2.

According to Unicredit analysts, after a turbulent week, we expect the next several days to see a modest increase in U.S. real rates, to which EGB yields should remain rather immune.

Periphery bond prices continued to underperform core bonds as they have benefited most from the ultraaccommodative monetary policy to avoid the pandemics adverse economic impact.

Italys 10year government bond yield rose 0.5 basis point to 0.835.

Markets…

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