Angela Merkel – Euro zone bond yields dip as warning returns

* Euro zone periphery govt bond yields

LONDON, Dec 15 (Reuters) – Euro zone bond yields dipped on Tuesday as issues about rising COVID-19 circumstances in main economies offset the promise of a return to normality because of a vaccine and cautious optimism about Brexit commerce talks.

Bond yields rose on Monday after an extension of commerce talks between Britain and the European Union eased fears of a messy parting of how between the 2.

However the promoting in bond markets was modest, with yields inching again down early on Tuesday as the newest coronavirus information injected a recent dose of warning into world markets.

Germany’s benchmark 10-year bond yield dipped to -0.627% , nearing current one-month lows of round -0.64%.

Italy might want to impose new restrictions in the course of the vacation season to rein in contagion and keep away from a 3rd, devastating wave of the coronavirus, the prime minister mentioned in an interview printed on Tuesday.

Germany, Europe’s largest economic system is unlikely to raise its lockdown early subsequent 12 months, a high aide to Chancellor mentioned on Monday. London, in the meantime, will transfer into England’s hardest tier of restrictions on Wednesday.

“The market remains wary of the light at the end of the tunnel,” mentioned Commerzbank charges strategist Rainer Guntermann.

“While Bunds remain torn between vaccine hopes and lockdown concerns, spreads continue to tighten as the ECB ‘preserves favourable funding conditions’,” he added, referring to hefty European Central Bank stimulus that has pinned down borrowing prices.

In southern Europe, Spain’s 10-year bond yield touched a brand new report low of -0.004%. Italy’s 10-year bond yield was a contact decrease on the day at 0.50%, additionally maintaining report lows in sight. That left the hole over benchmark German Bund yields hovering round 112 foundation points.

Antoine Bouvet, a senior charges strategist at ING, mentioned the present backdrop was additionally beneficial for a near-term tightening within the hole between U.S. and European bond yields.

“Barring an imminent trade deal, Brexit optimism should slowly deflate, leading to lower rates,” he mentioned.

“Recent lockdown announcements suggest that gloom will persist on both sides of the Atlantic, and drive a temporary re-tightening of the U.S. and euro rates differential.” (Reporting by Dhara Ranasinghe; Modifying by Pravin Char)

Read original article here.