LONDON Oct 11 Europe's benchmark bond yield
held near a one-month high on Tuesday after an
inflation-boosting rise in oil prices coincided with more hints
that central bankers were rowing back on monetary easing.
German 10-year yields dipped slightly from Monday's peak,
but strategists saw little room for further falls with yields on
other bond benchmarks in the U.S. and Japan at four-month and
three-week peaks, respectively.
Brent crude struck a one-year high on Monday after Russia
said it was ready to join a group of oil producers planning to
curb oil output.
This signals a potential boost to inflation that would take
the heat off central banks struggling to lift consumer prices
with ultra-low rates and bond-buying purchase programmes.
After a recent Bloomberg report that a consensus is growing
among European Central Bank policymakers to eventually scale
back or "taper" purchases, Governing Council member Ignazio
Visco said on Monday that any exit would largely depend on
Meanwhile, Bank of Japan Governor Haruhiko Kuroda said on
Sunday that its bond buying could be reduced considerably under
a new framework adopted last month, while the U.S. Federal
Reserve is broadly expected to raise rates for just the second
time in a decade later this year.
"The bearish trend is your friend," wrote Societe Generale
strategists in a note on Tuesday.
"Concerns about central banks turning the corner are
growing... and hurting bonds. The...rise in oil prices only
added to the bond misery."
German 10-year bond yields edged down 1 basis point to 0.05
percent on Tuesday, coming off Monday's 0.06
percent level, which was the highest since September 15.
A key market measure of long-term inflation expectations in
the euro zone -- the five-year, five-year breakeven forward rate
-- is holding near its highest level since June.
Japanese bond yields earlier climbed 2 bps to hit minus 0.05
percent for the first time since Sept. 23, while
U.S. equivalents climbed 4 bps to hit 1.77 percent,
the highest since June 3.
The U.S dollar hit an 11-week high against a basket of other
major currencies, as money market prices suggested a 70
percent chance that the Federal Reserve will hike interest rates
at its Dec. 13-14 meeting, according to CME Group's FedWatch
On the data front, euro zone analysts were waiting for a ZEW
survey of German investor sentiment 1000GMT for further signs of
confidence in the bloc's biggest economy.
Economists polled by Reuters expect economic sentiment to
have risen modestly to 4.3 in October from 0.5 in September.
Analysts at Commerzbank said that while this would not
necessarily be a signal of reviving growth, "it may further sour
market sentiment in Bunds". Commerzbank expects Bund yields to
rise towards 0.08 percent, the highest seen since Britain's vote
to leave the EU in mid-June.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Editing by Raissa Kasolowsky)