Euro zone bond yields edge lower, focus on BoE

The BoE is expected to say that Britain's economy is heading for a much stronger recovery this year than it previously expected, and it might start to slow its pandemic emergency support

  
George Washington is seen with printed medical masks on the one Dollar near Euro banknotes in this illustration taken, March 31, 2020. Image used for illustrative purpose

George Washington is seen with printed medical masks on the one Dollar near Euro banknotes in this illustration taken, March 31, 2020. Image used for illustrative purpose

REUTERS/Dado Ruvic/Illustration

MILAN - Euro zone government bond yields edged lower on Thursday as comments from central banks' officials eased concerns about a possible tapering, while investors focused on the Bank of England (BoE) meeting.

The BoE is expected to say that Britain's economy is heading for a much stronger recovery this year than it previously expected, and it might start to slow its pandemic emergency support.  

"Today and the coming months will provide further data points to central bankers at the Federal Reserve and European Central Bank (ECB) on how to manage the exit from exceptionally accommodative monetary policy," ING analysts said, referring to the BoE meeting.

"The U.K. is no sandbox; however, the repercussions on other rates markets in case of botched communication could be significant," they added.

Germany's 10-year government bond yield was down one basis point to -0.24%.

British 10-year gilt yields fell 1.5 basis points to 0.804%.

Fed officials tried to allay fears of runaway inflation as the economy recovers from the pandemic, driving U.S. Treasury yields lower on Wednesday. 

At the same time, ECB chief economist Philip Lane said on Wednesday inflation would be in the low 1% range next year, and the current round of targeted longer-term refinancing operations (TLTROs) will prove effective. 

"Lane's soothing comments on inflation and prospects of TLTRO adjustments add to the easing central bank exit anxiety," Commerzbank analysts told clients.

Italy's 10-year government bond (BTP) yield was down one basis point to 0.843%, while the closely watched spread with German yields is tightening by one basis point to 107.2.

"The persistent widening bias in BTPs is probably also underpinning Bunds while Greek government bonds were able to outperform as the new 5-year was launched (on Wednesday)," Commerzbank analysts added.

Greece raised 3 billion euros ($3.61 billion) from the sale of a new five-year bond on Wednesday, with demand for the issue exceeding 20 billion euros. 

($1 = 0.8317 euros)

(Reporting by Stefano Rebaudo; Editing by Christopher Cushing) ((stefano.rebaudo@thomsonreuters.com; +390266129431;))


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