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Euro zone bond yields edge lower ahead of inflation data

Euro zone bond yields edge lower ahead of inflation data

reuters.com · 04/29/2022 03:45
Euro zone bond yields edge lower ahead of inflation data

- Euro zone bond yields edged lower on Friday ahead of inflation data for the bloc that is keeping investors on edge.

The data at 0900 GMT is expected to show inflation rose to 7.5% in April, from 7.4% in March, but it follows the release for Europe's biggest economy Germany on Thursday, where inflation came in higher than expected and pushed bond yields sharply higher. nAPN0K2FV9 nL2N2WQ0PR

On Friday, French inflation rose unexpectedly in April to hit a record high. While euro zone bond yields came off session lows, by 0732 GMT, Germany's 10-year yield, the benchmark for the bloc, was still down 2 basis point at 0.88%, compared to a a 9 bps jump on Thursday following the German data. DE10YT=RR

"The upside surprise to Germany's index has likely skewed expectations higher, but the release has shown that markets are still very sensitive to upside surprises," ING analysts told clients.

"Despite renewed volatility in energy markets, the focus should increasingly be on core measures to assess how much the energy-related jump is feeding into other components."

Inflation pressures have pushed bond yields sharply higher this year as hawkish signals from central banks led markets to reprice rates expectations. Benchmark 10-year German bond yields are set for their fifth straight month of rises, up 33 bps in April.

Elsewhere, Italy will be in the primary market to raise up to 8 billion euros from an auction of five and 10-year bonds, and a seven-year floating-rate bond.

It comes as Italy's debt, among the biggest beneficiaries of European Central Bank stimulus, is under pressure. The closely-watched risk premium Italy pays for 10-year debt over Germany has risen 35 basis points this month, the biggest move since April 2020. DE10IT10=RR

The 10-year yield itself climbed 67 bps, the biggest monthly jump since May 2018. IT10YT=RR

On Friday, Italy's debt outperformed slightly, and the risk premium was at 180 bps, after hitting the highest since June 2020 at nearly 183 bps.

(Reporting by Yoruk Bahceli
Editing by Tomasz Janowski)

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