financetom
World
financetom
/
World
/
Euro zone yields struggle for direction after Biden, but spreads tighten
News World Market Environment Technology Personal Finance Politics Retail Business Economy Cryptocurrency Forex Stocks Market Commodities
Euro zone yields struggle for direction after Biden, but spreads tighten
Jul 23, 2024 4:45 AM

July 23 (Reuters) - Euro zone government bond yields

dropped on Tuesday after rising the day before as investors

awaited developments in the U.S. presidential election campaign

amid expectations of stability in the European Central Bank's

monetary easing path.

U.S. President Joe Biden abandoned his reelection bid on

Sunday and endorsed Vice President Kamala Harris as the party's

candidate to face Republican Donald Trump.

Analysts said it would take weeks before clues emerged about

whether Harris can undermine Trump's chances of winning the Nov.

5 election.

U.S. Treasury yields edged up on Monday as markets assessed

the uncertainty surrounding the race for the White House.

Germany's 10-year government bond yield, the

euro area's benchmark, dropped 3 basis points (bps) to 2.45%

after rising 2 bps the day before.

ECB Vice-President Luis de Guindos hinted at a possible

interest rate cut in September, singling out the ECB's new

projections as the "most important" factor in determining

whether inflation is falling back to target.

Money markets are currently pricing an around 80% chance of

a rate cut in September and the same chance

of two additional rate cuts by year-end..

"As Fed and ECB cuts start materialising, we expect yields

to go lower, but a well-anchored terminal ECB rate means that

the scope for lower rates could be limited in the euro zone,"

said ING analysts, recalling that all the ECB's Surveys of

Monetary Analysts have shown an ECB terminal rate of 2.25%.

The yield gap between Italian and German 10-year bonds

- a gauge of the risk premium investors demand to

hold Italian debt - was at 128 bps after last week hitting 120

bps, a level seen before French President Emmanuel Macron called

for snap elections, sending jitters across financial markets.

Macron's decision set off a political earthquake, offering

the far right a shot at political power and raising fears that

such a government could increase fiscal spending, threatening

the sustainability of France's public debt.

Those fears subsided after the outcome of the vote left

Macron's Together group in charge of forming a new government

without far-right and far-left parties.

"With the positive momentum and lighter supply ahead, we

estimate net issuance of close to zero until the end of the

year. BTP spreads have scope for further performance, not only

versus Bunds but also versus OATs," said Hauke Siemssen, rate

strategist at Commerzbank.

The yield spread between Italian and French bonds

hit 55 bps early last week, its lowest level since

October 2021.

The so-called peripheral euro zone countries, including

Italy, Spain, Portugal and Greece, have seen their yield spread

tighten as France's public debt trajectory has caused increasing

concern among market participants.

Comments
Welcome to financetom comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
Related Articles >
CANADA STOCKS-TSX starts the week muted; commodity-linked stocks lead gains
CANADA STOCKS-TSX starts the week muted; commodity-linked stocks lead gains
Jun 10, 2024
June 10 (Reuters) - Canada's main stock index started the week on a muted note as gains in materials and energy stocks from higher commodity prices were offset by investor caution ahead of crucial U.S. inflation data and the Federal Reserve's monetary policy meeting later in the week. At 9:30 a.m. ET (13:30 GMT), the Toronto Stock Exchange's S&P/TSX composite...
FOREX-Euro tumbles as Macron calls snap French election
FOREX-Euro tumbles as Macron calls snap French election
Jun 10, 2024
(Updated at 1015 EDT/1415 GMT) By Karen Brettell and Alun John NEW YORK/LONDON, June 10 (Reuters) - The euro fell sharply on Monday after gains by the far right in European Parliament elections on Sunday prompted French President Emmanuel Macron to call a snap national election. The uncertainty in France adds one more element to what will be a busy...
EMERGING MARKETS-Mexican peso steers Latam FX lower as political uncertainties loom
EMERGING MARKETS-Mexican peso steers Latam FX lower as political uncertainties loom
Jun 10, 2024
* Brazil's c.bank chief says neutral rate rising in short term * Argentina economy minister forecasts May inflation below 5% * Colombian equity market closed * Latam FX down 1.3%, stocks off 1% By Ankika Biswas June 10 (Reuters) - Mexico's peso fell to a more than one-year low versus the dollar on Monday, leading losses in Latin American currencies...
Asian Equities Traded in the US as American Depositary Receipts Open Week Higher in Monday Trading
Asian Equities Traded in the US as American Depositary Receipts Open Week Higher in Monday Trading
Jun 10, 2024
10:49 AM EDT, 06/10/2024 (MT Newswires) -- Asian equities traded in the US as American depositary receipts opened the week trending higher Monday morning, rising 0.66% to 1,957.14 on the S&P Asia 50 ADR Index. From North Asia, the gainers were led by diagnostic imaging centers company Concord Medical Services ( CCM ) , which climbed 14%, followed by automotive...
Copyright 2023-2026 - www.financetom.com All Rights Reserved