Italian 10-year government bond yields fell to a record in the week on bets European Central Bank officials will maintain monetary stimulus even as their peers in the U.K. and U.S. consider tighter policy.
Spanish 10-year yields also fell to a record as reports showed euro-area manufacturing and services grew at a slower pace this month and consumer confidence declined more than economists predicted.
German 10-year bunds yielded the lowest relative to Treasuries since 1999 as Federal Reserve minutes showed officials raised the possibility of increasing interest rates sooner than they had anticipated.
“Data continues to be quite weak, and this in turn is fueling quantitative-easing expectations,” said Felix Herrmann, an analyst at DZ Bank AG in Frankfurt, referring to a central-bank policy of asset purchases to kickstart growth and fuel inflation.
“The hunt for yield in the periphery continues.” Italy’s 10-year rate fell one basis point, or 0.01 percentage point, to 2.58 percent at 5 p.m. London time yesterday, after touching 2.561 percent on Aug. 20, the lowest since Bloomberg started collecting the data in 1993.
The 3.75 percent bond due in September 2024 was at 110.455. Spain’s 10-year yields dropped to as low as 2.371 percent on Aug. 21, before ending the week at 2.38 percent, a drop of two basis points from Aug. 15.
Germany’s benchmark debt rose three basis points to 0.98 percent, after touching a record-low 0.951 percent on Aug. 15. That left the yield difference, or spread, between the German securities and similar-maturity U.S. Treasuries (GDBR10) at 143 basis points.
The spread widened to 144 basis points on Aug. 20, the most since June 1999, based on closing prices.
PMI Indicator
Markit Economics said Aug. 21 that its composite Purchasing Managers Index for the euro region fell to 52.8 in August, from 53.8 the previous month.
The median estimate of economists in a Bloomberg News survey was for a decline to 53.4. An index of household sentiment in the euro area decreased to minus 10 from minus 8.4 in July, the European Commission in Brussels said in a preliminary report the same day.
That was below the median forecast of minus 9.1 in a Bloomberg News survey of economists. A report this week will show that inflation in the euro region slowed to an annual 0.3 percent in August, which would be the lowest since 2009, according to a Bloomberg survey of economists before the European Union’s Aug. 29 release.
Italian Auctions
Italy is scheduled to sell as much as 3 billion euros of zero-coupon 2016 notes on Aug. 26, followed by offerings of bills and bonds the following two days. Spain is due to sell securities maturing in three and nine months on Aug. 26. Italy’s bonds returned 11 percent this year through Aug. 21, Bloomberg World Bond Indexes show.
Spanish bonds earned 12 percent and Germany’s gained 6.8 percent. In the U.S., Federal Reserve Chair Janet Yellen said in a speech at the Kansas City Fed’s annual economics conference in Jackson Hole, Wyoming, yesterday that the economy “has made considerable progress in recovering” even as slack remains in the labor market.
She underscored the Federal Open Market Committee statement last month that “underutilization of labor resources still remains significant.”
bloomberg.com
Spanish 10-year yields also fell to a record as reports showed euro-area manufacturing and services grew at a slower pace this month and consumer confidence declined more than economists predicted.
German 10-year bunds yielded the lowest relative to Treasuries since 1999 as Federal Reserve minutes showed officials raised the possibility of increasing interest rates sooner than they had anticipated.
“Data continues to be quite weak, and this in turn is fueling quantitative-easing expectations,” said Felix Herrmann, an analyst at DZ Bank AG in Frankfurt, referring to a central-bank policy of asset purchases to kickstart growth and fuel inflation.
“The hunt for yield in the periphery continues.” Italy’s 10-year rate fell one basis point, or 0.01 percentage point, to 2.58 percent at 5 p.m. London time yesterday, after touching 2.561 percent on Aug. 20, the lowest since Bloomberg started collecting the data in 1993.
The 3.75 percent bond due in September 2024 was at 110.455. Spain’s 10-year yields dropped to as low as 2.371 percent on Aug. 21, before ending the week at 2.38 percent, a drop of two basis points from Aug. 15.
Germany’s benchmark debt rose three basis points to 0.98 percent, after touching a record-low 0.951 percent on Aug. 15. That left the yield difference, or spread, between the German securities and similar-maturity U.S. Treasuries (GDBR10) at 143 basis points.
The spread widened to 144 basis points on Aug. 20, the most since June 1999, based on closing prices.
PMI Indicator
Markit Economics said Aug. 21 that its composite Purchasing Managers Index for the euro region fell to 52.8 in August, from 53.8 the previous month.
The median estimate of economists in a Bloomberg News survey was for a decline to 53.4. An index of household sentiment in the euro area decreased to minus 10 from minus 8.4 in July, the European Commission in Brussels said in a preliminary report the same day.
That was below the median forecast of minus 9.1 in a Bloomberg News survey of economists. A report this week will show that inflation in the euro region slowed to an annual 0.3 percent in August, which would be the lowest since 2009, according to a Bloomberg survey of economists before the European Union’s Aug. 29 release.
Italian Auctions
Italy is scheduled to sell as much as 3 billion euros of zero-coupon 2016 notes on Aug. 26, followed by offerings of bills and bonds the following two days. Spain is due to sell securities maturing in three and nine months on Aug. 26. Italy’s bonds returned 11 percent this year through Aug. 21, Bloomberg World Bond Indexes show.
Spanish bonds earned 12 percent and Germany’s gained 6.8 percent. In the U.S., Federal Reserve Chair Janet Yellen said in a speech at the Kansas City Fed’s annual economics conference in Jackson Hole, Wyoming, yesterday that the economy “has made considerable progress in recovering” even as slack remains in the labor market.
She underscored the Federal Open Market Committee statement last month that “underutilization of labor resources still remains significant.”
bloomberg.com
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