Euro zone bond yields fall over weak US data

Euro zone bond yields fell on Wednesday on bets that weak data from the United States has put pressure on the European Central Bank to announce further policy easing measures.

The news will be welcomed by the NTMA, which is due to auction €1 billion of Irish 10-year debt on Thursday.

The ECB meets on Thursday. On Tuesday, data showed that the US service sector expanded more slowly in August than in July, with the fall the largest since the 2008 financial crisis.

This, on the back of Friday’s weak jobs numbers, pushed back expectations for a US rate hike.

“With a September rate hike looking less likely to happen, the ECB might be more pressured to come up with a decision this week on further measures,” said Benjamin Schroeder, senior rates strategist at ING.

The ECB is expected to leave rates unchanged when its governing council meets but could use the opportunity to extend its bond-buying scheme and tweak the parameters to ease supply scarcity issues.

Euro zone bond yields edged lower, with the yield on the 10-year German bond dipping 1 basis point to minus 0.12 per cent. Irish 10-year yields traded at around 0.35 per cent.

The fall came even as the German debt management office sold €3.5 billion of new 10-year bonds with a yield of minus 0.11 per cent, a record low at auction.

Germany’s longer-dated bonds proved even more popular on the day, with 30-year bond yields briefly falling as much as 5 bps to just below 0.4 per cent.

Spanish bond yields edged lower, extending Tuesday’s fall when the 10-year bond recorded its biggest daily tumble since the start of July.

– (Reuters)