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Euro zone bonds rally as U.S. bank jitters lifts safe havens

Reuters · 03/10/2023 03:26
Euro zone bonds rally as U.S. bank jitters lifts safe havens

- Government bonds across the euro zone rallied on Friday, winning a reprieve from rate-rise expectations for as a selloff in U.S. bank stocks boosted demand for safe-haven assets.

Germany's two-year bond yield slid almost 20 basis points (bps) to 3.08%, set for its biggest one-day fall since July, as its price shot higher.

Ten-year German Bund yields fell to a two-week low at around 2.49% DE10YT=RR. Across the euro area, 10-year bond yields were down over 10 bps NL10YT=RRFR10YT=RR.

SVB Financial Group SIVB.O tried on Thursday to reassure its venture capital clients their money was safe after a capital raise led to its stock collapsing 60% and contributed to wiping out over $80 billion in value from bank shares.

That sparked a 6.6% slide in U.S. bank stocks on Thursday, while European shares opened broadly weaker on Friday .STOXX.

Also in focus was the Bank of Japan, which maintained ultra-low interest rates on Friday and held off making changes to its controversial bond yield control policy, leaving options open ahead of a leadership transition in April.

"The entire rally in rates was driven by the from SVB," said Pooja Kumra, senior European and UK rates strategist at TD Securities in London.

"The BOJ keeping its stance unchanged has added to the momentum in bond markets."

She said that renewed volatility across financial markets meant that U.S. jobs data out later in the session could have a bigger-than-anticipated impact if the comes in weaker than forecast.

Economists polled by Reuters forecast the U.S. economy created 205,000 jobs last month after January's stellar 517,000 increase.

U.S. Treasury yields were also down sharply in early trade, with U.S. and European bond markets both winning a reprieve from fears of a further jump in interest rates to contain inflation that have knocked markets in recent days.

(Reporting by Dhara Ranasinghe; Editing by Angus MacSwan)

((Dhara.Ranasinghe@thomsonreuters.com; +442075422684;))