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Home / Business / Eurozone yields fall, but the US Treasury landmark hangs above the market

Eurozone yields fall, but the US Treasury landmark hangs above the market



* Bonds Asked Before Ifo Survey, Debt Repayments

* 10-year US yields, however, fluctuate near 3-percent mark

* Italy / Germany continues to spread before ECB meeting [19659002] * Eurozone Peripheral Government Bond Yields tmsnrt.rs/2ii2Bqr

By Abhinav Ramnarayan

LONDON, April 24 (Reuters) – Investors resumed bond purchases of Eurozone government bonds on Tuesday, pushing yields lower the economic climate has asserted itself as the main driver of the market again.

A Tuesday morning survey by the German Ifo Institute is likely to confirm a slowdown in the positive business climate in the Union, while just € 41 billion in repayment of French government bonds should boost demand for debt.

However, analysts warned that all bets are off when 1

0-year US Treasury yields hit 3 percent after reaching some of the psychologically important spot on Monday.

"Apart from the imbalance between supply and demand, the Ifo survey underscores what we have previously identified as a decline in economic sentiment in the eurozone that should actually support the market," said Commerzbank strategist Christoph Rieger.

Eurozone borrowing costs fell across the board, with yields on 10-year German Bunds – the benchmark for the bloc – dropping 1.5 basis points to 0.62 percent.

Most other Eurozone bond yields were 1-2 basis points lower.

This could change, depending on what happens with debts from across the Atlantic. Yields on ten-year US Treasuries were 2.966 percent. After the oil price rose above $ 75 a barrel for the first time since the end of 2014, a further rise can not be ruled out.

"Whether this will be the beginning of a new series or the beginning of a bear market is the question, or whether it is a welcome buying opportunity," said Rieger of Commerzbank.

An increase in US Treasury yields is likely to be a "magnet" and will boost yields in the Eurozone, he said.

Meanwhile, the market is also preparing for the meeting of the European Central Bank on Thursday. Investors hope to understand how worrying the policy makers are about curbing the economic sentiment in the Union.

Any increase in concern should further drive interest rate hike prospects and continue the potential for asset purchases by the end of the year.

Later on Tuesday, ECB member Francois Villeroy de Galhau will speak on topics such as the outlook for the ECB's bond-buying program.

In recent weeks, peripheral government bonds – which are considered beneficiaries of the ECB's bond-buying program – have performed strongly compared to better-rated peer companies.

Italy's ten-year government bond yield over Germany is nearing its lowest point since August 2016 at 116 bp, despite political uncertainty in that country following the parliamentary elections in March.

Italy's president asked Monday the head of the lower house of parliament if the 5-star movement and the center-left Democratic Party (PD) could form a coalition government, but a first reaction indicated that this was unlikely be. (Reporting by Abhinav Ramnarayan section by Andrew Heavens)


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