April 10, 2018 / 8:48 AM / 9 months ago

Euro zone borrowing costs hold steady ahead of heavy day for supply

* Euro zone yields down 1-2 bps on the day

* Heavy day in new supply

* Auctions by Germany, the Netherlands, Austria

* tmsnrt.rs/2ii2Bqr

By Fanny Potkin

LONDON, April 10 (Reuters) - Euro zone borrowing costs held near recent lows in early trades on Tuesday, kept low by an expected wave of redemptions from maturing bonds. The Netherlands, Austria, and Germany are all scheduled to hold auctions on Tuesday, while Ireland is expected to launch its new 15-year benchmark. However, because money is flowing back into investor pockets’ from maturing bonds, yields were a touch lower on the day.

Germany’s 10-year bond yield, the benchmark for the bloc kept near recent lows at 0.495 percent, down 1 basis point on the day.

“Investors are quite hopeful and not really concerned with any supply indigestion,” said DZ Bank Strategist Christian Lenk.

“If you take into account the very strong redemption and coupon payments due in the next few weeks, the market should stay well-supported.”

Commerzbank estimates that around 60 billion euros of European government bonds mature this week and only about 13 billion euros of supply is available to counter this.

“Another factor boosting demand for European governments bonds has been data from the Japanese Ministry on Monday which showed a switch in Japanese investors from U.S treasuries to European government bonds,” DZ Bank’s Lenk said.

European Central Bank policymaker Ewald Nowotny gave a speech on Tuesday, expressing confidence in the euro zone’s economy, but reiterating the ECB needed to start normalisation now.

“Now I think it is time for a gradual normalisation of monetary policy. This normalisation requires a delicate balancing of measures as well as careful sequencing in time,” said Nowotny.

Later on Tuesday, fellow ECB governor Ignazio Visco is scheduled to speak.

Elsewhere, Chinese leader Xi Jinping promised to lower import tariffs and take measures to widen market access to foreign investors, helped soothe market jitters over an escalating U.S.-China trade row.

U.S. 10-year Treasuries fell on the news, pushing their yields up almost 2 basis points to 2.80 percent. (Reporting by Fanny Potkin Editing by Keith Weir)

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