German 10-year bond yields were near a record low today as investors bet the Federal Reserve may signal it's ready to take steps to support growth amid signs economic recovery has stalled.
Two-year note yields stayed little changed after a report showed consumer price inflation in Germany accelerated in July as crude oil rose and a weaker euro pushed up prices of imported goods.
The Federal Open Market Committee plans to release a statement on its policy decision at about 2.15pm. in Washington.
"The Fed will certainly acknowledge that data and the momentum have taken a turn for the worse," said John Wraith, a fixed-income strategist at Bank of America Merrill Lynch in London. "But we don't think they are going to go all the way and start endorsing a big purchase of Treasuries. Not at this point. The market is probably a bit ahead of itself in anticipating something more aggressive from this meeting."
The yield on the 10-year German bund was at 2.53 per cent as of 7.48am in London.
The yield reached 2.499 per cent on June 8th, the lowest since at least 1989, when Bloomberg began compiling the data. Two-year yields were at 0.714 per cent.
Fed Chairman Ben S. Bernanke said on July 21st that the central bank wasn't ready to take any action in the "near term." At the same time, his assessment that the "economic outlook remains unusually uncertain," along with recent weakness in data on housing and manufacturing, have fuelled speculation by some economists that the Fed will take steps to extend bond purchases as soon as today.
The inflation rate in Germany, calculated using a harmonised European Union method, rose to 1.2 per cent from 0.8 per cent in June, the Federal Statistics Office said in Wiesbaden today.
Bloomberg