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Euro zone bond yields tick up, eyeing Fed

Euro zone bond yields tick up, eyeing Fed

· 03/17/2021 04:23
Euro zone bond yields tick up, eyeing Fed

Euro area bond moves subdued ahead of Fed

Greece expected to launch first 30-year bond since 2008

By Yoruk Bahceli

- Euro zone bond yields inched higher, following U.S. Treasuries ahead of the U.S. Federal Reserve's meeting later on Wednesday.

U.S. benchmark Treasury yields ticked up in early London trade, nearing recent 13-month highs as investors awaited the Fed's latest policy decision. The Fed is in focus as expectations that vast U.S. fiscal stimulus will boost economic growth and cause inflation to rebound have pushed government bond yields higher in recent weeks.

Markets will be focusing on the Fed's so-called "dot plot", which shows the outlook for its policy rate. While some economists expect this will show one rate hike for 2023 versus none in December, an unchanged median dot for that year could be interpreted as Fed push-back against the recent bond market sell-off.

"With the FOMC meeting looming large as potential catalyst for the next move in Treasuries, EUR markets are unlikely to venture far with data calendars otherwise void," ING analysts told clients, referring to the Fed.

With euro area bonds continuing to outperform Treasuries on Wednesday, analysts said the European Central Bank's decision to accelerate its pandemic emergency bond purchases last week, and delays in the bloc's vaccine roll-out topped by a temporary halt to AstraZeneca vaccinations were keeping bond yields subdued in the bloc.

At 0807 GMT, Germany's 10-year yield, the benchmark for the bloc, was unchanged at -0.34%. DE10YT=RR

Italian 10-year yields were also unchanged at 0.63%, keeping the closely watched risk premium over German equivalents at 95 basis points. DE10IT10=RR

Focus is also on the primary market on Wednesday, where Greece is expected to launch its first new 30-year bond since 2008 after hiring a syndicate of banks on Tuesday. nL8N2LE3LV

Luxembourg is also selling a new 10-year bond via a syndicate of banks, according to a lead manager memo seen by Reuters.

In auctions, Germany will re-open a 30-year bond to raise 1.5 billion euros, while Italy will offer a bond due 2031 in exchange for four bonds expiring later this year. nL8N2LD5X2

(Reporting by Yoruk Bahceli; Editing by Giles Elgood)

((Yoruk.Bahceli@thomsonreuters.com; +44 20 7542 7571; Reuters Messaging: yoruk.bahceli@thomsonreuters.com))