REFILE-UPDATE 1-Euro zone bond yields dip; focus on supply
(Refiles to clarify Friday reference in paragraph 6 is to Fed chairman Powell’s speech)
Aug 24 (Reuters) – Euro zone bond yields dipped on Tuesday with investors focusing on issuance in a data-light session.
Risk sentiment has improved this week as concerns eased over Federal Reserve stimulus tapering and on full U.S. approval of the Pfizer/BioNTech vaccine, keeping the bloc’s bond yields above lows hit last week.
Yields fell last week as the spread of the coronavirus and fears of a slowdown of U.S. Federal Reserve bond-buying boosted safe-haven bonds. Bond yields move inversely with prices.
On Tuesday, Germany’s 10-year yield, the benchmark for the euro area, was down less than a basis point to -0.48% by 1041 GMT, above last week’s two-week low at -0.502%, after a slight rise on the day earlier in the session.
Italian 10-year bond yields were down one basis point to 0.57%, bringing the closely watched gap to 10-year German yields to 105 bps, below Monday’s three-week high of nearly 107 bps.
With little data to focus on in the bloc except for an upward revision to Germany’s second-quarter gross domestic product ahead of Fed chairman Jerome Powell’s speech at the Jackson Hole symposium on Friday, attention was on supply.
“The bonds markets are still in a wait-and-see stance ahead of the Jackson Hole conference that begins on Thursday,” Jens Peter Sorensen, chief analyst at Danske Bank, told clients.
“The markets seems to be adjusting their expectations towards a more dovish statement from Fed Chairman Powell, where he will be more vague on the tapering.”
Finland received over 15 billion euros of investor demand for the sale of a five-year bond that will raise three billion euros ($3.52 billion) later on Tuesday, according to a lead manager memo seen by Reuters.
That is the bloc’s first syndicated government bond sale – where a borrower hires investment banks to sell debt directly to investors – since the summer break.
Germany raised 2.48 billion euros from the re-opening of a seven-year bond at auction.
Outside of the euro zone, Britain raised 3 billion pounds at a five-year auction, while the U.S. Treasury will raise $60 billion from a two-year auction, which will be followed by further issuance in other maturities this week.
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