LONDON (Reuters) - Euro zone bonds eased on Wednesday after minutes from the Bank of England showed no support from policymakers for more bond purchases, unnerving investors before the head of the Federal Reserve testifies to Congress.
The BoE minutes showed all ratesetters voted against further asset purchases at this month’s meeting, serving markets with a reminder that global central bank stimulus programs will eventually end.
Fed Chairman Ben Bernanke is expected to make the same point later in the day, balancing that with a message of continued central bank support for the U.S. economy.
Tracking their British counterparts, euro zone bonds were lower across the credit spectrum, with the German debt market also having to absorb 10-year supply, but trading was range-bound.
“Investors are a little bit reluctant to buy or to take positions in general ahead of the speech of Bernanke this afternoon, especially (because) everybody knows that his latest two speeches led to a massive spike in volatility and you can’t really predict which way it’s going to go,” Christian Lenk, strategist at DZ Bank said.
German Bund futures fell 31 ticks on the day to 143.38, pushing 10-year yields 2.5 basis points higher to 1.58 percent.
They have fallen 27 basis points from more than one-year highs in late June but are still 43 bps above this year’s lows of 1.153 percent hit in May.
“In the U.S., yields have come off their highs but not very much, so I suspect the market is still a bit short going into that speech, which would mean that if Bernanke is very dovish ... then we can get further reaction down in yield terms of the Treasuries and by association also for the Bund,” KBC strategist Piet Lammens said.
Germany sold 3.19 billion euros of 10-year bonds, drawing bids worth 1.6 times the amount on offer, more than the 1.5 at an auction on June 19 and above this year’s 1.5 average.
French, Dutch, and Belgian yields were about 3 basis points higher on the day, while lower-rated debt also fell.
Ten-year Spanish bond yields rose 2.8 basis points to 4.69 percent and the Italian equivalent 2.7 bps to 4.50 percent.
Spain’s opposition Socialists said on Tuesday they would call a symbolic vote of no-confidence against Prime Minister Mariano Rajoy if he refused to appear before Parliament to answer questions about a deepening scandal over party financing.
In Portugal, one-year borrowing costs jumped to their highest since last October at a Treasury bill auction as a simmering political crisis threatened to derail the country’s planned exit from its bailout next year. [ID:nL6N0FN1HJ] Ten-year Portuguese yields were flat at 7.30 percent.
Editing by John Stonestreet