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Euro zone bond yields edge up as market braces for taper clues
July 6, 2017 / 7:48 AM / 5 months ago

Euro zone bond yields edge up as market braces for taper clues

* Euro zone periphery govt bond yields

By Abhinav Ramnarayan

LONDON, July 6 (Reuters) - Euro zone government bond yields in general and southern ones in particular rose on Thursday with investors expecting European policymakers to follow their U.S. counterparts in signalling tighter policy.

The account of the European Central Bank’s last monetary policy meeting is due to be published later in the day and a number of key policymakers are scheduled to speak. Investors will be keeping an eye out to see if the ECB has moved closer towards unwinding extraordinary stimulus.

In the United States, the minutes of the Federal Reserve’s last policy meeting showed some policymakers in favour of starting to reduce the Fed’s balance sheet in a couple of months.

Though policymakers appeared divided on the outlook for inflation and the future pace of rate hikes, U.S. Treasury yields remained near recent highs, with 10-year yields a touch higher Thursday at 2.34 percent.

“The bottom line is that more and more investors are growing confident that the Fed will continue its gradual tightening next year,” said ING strategist Martin Van Vliet. “And there is a spillover effect into Europe - though the ECB minutes could change that.”

Most high-rated euro zone bond yields were up 2-3 basis points on Thursday and low-rated southern European bond yields even more so.

The yield on Spanish, Italian and Portuguese 10-year government debt was higher 5-6 basis points.

Yields have risen sharply in recent weeks on the belief that the ECB could announce the tapering of its two trillion euro bond-buying scheme as early as September, after ECB chief Mario Draghi appeared to open the door to policy tweaks.

ECB Chief Economist Peter Praet will speak in Paris while Bundesbank President Jens Weidmann and Austrian central bank governor Ewald Nowotny are due to participate in a conference.

“Volatility should remain elevated amid headline risks from ECB speakers, accounts from the latest meeting and likely solid US labour market data,” said Commerzbank analyst Rainer Guntermann.

Yields may also be affected by large bond sales from France and Spain scheduled for later today.

France is to sell 7.5-8.5 billion euros of long-dated bonds while Spain will raise 3-4 billion euros through a debt auction that includes a reopening of its 30-year benchmark bond.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=

Editing by Jeremy Gaunt

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