Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  News  >  Interest Rates

News : Interest Rates

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance ProfessionalsCalendarSectors 

New Fed chief sends euro zone bond yields higher

share with twitter share with LinkedIn share with facebook
share via e-mail
0
02/27/2018 | 06:40pm CEST
Illustration photo of U.S. Dollar and Euro notes

LONDON (Reuters) - Euro zone government bond yields rose on Wednesday after new Federal Reserve chief Jerome Powell said the U.S. economy had strengthened since December and inflation will rise, encouraging bets that the Fed might raise rates four times in 2018.

In a prepared testimony to Congress, Powell said the U.S. central bank would stick to a gradual approach to raising interest rates with inflation stuck below its 2 percent goal.

But bond markets in Europe and the United States came under selling pressure after Powell's comments in the question-and-answer session with lawmakers.

With U.S. 10-year Treasury yields up almost 5 basis points on the day at 2.91 percent <US10YT=RR>, bond yields in the euro area followed suit.

Germany's benchmark 10-year bond yield rose 3 bps to 0.68 percent <DE10YT=RR>, pushing the gap with U.S. peers to around 223 bps - its widest in 14 months.

"If you're talking about the concept of overheating, Powell is suggesting the Fed will err on the side of caution," said Chris Scicluna, head of economic research at Daiwa Capital Markets.

Scicluna cautioned against reading too much into one set of remarks from Powell but added: "You can say the risk is on the side of higher rates."

U.S. short-term interest rate futures fell after Powell's comments. Traders continued to expect the first hike of the year to come next month, and see a more than one in four chance that the Fed would raise rates three more times this year.

Most euro zone bond yields were up 2-3 bps on the day, although Italian bonds outperformed after strong demand at a debt auction, the last one before this weekend's national election.

The southern European country, which goes to the polls on Sunday, sold around 7.71 billion euros of debt.

That was towards the top end of a targeted range, suggesting sentiment towards Italy remains firm ahead of the election.

"Given the risks we have ahead of the election and with bond yields turning up, the auction results saw fair demand," said Daniel Lenz, a rates strategist at DZ Bank.

Italy's 10-year bond yield fell 2 basis points to 2.09 percent <IT10YT=TWEB>. The gap between Italian and German bonds yields moved to 143 bps, its narrowest in five days and well below recent highs of 152 bps.

The spread had widened in recent weeks as the election approached, making Italian bonds more attractive to those investors who take a more sanguine view of political risk in the euro zone's third-largest economy.

(Additional reporting by Fanny Potkin and Abhinav Ramnarayan; Editing by Susan Fenton)

By Dhara Ranasinghe and Fanny Potkin

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news "Interest Rates"
06/22Graphic - Asian bonds sell off in May as investors hunt for better yield
RE
06/21Bank of England brings forward potential timing of QE bond sell-off
RE
06/21Transatlantic bond will be preserved, says NATO chief Stoltenberg
RE
06/19ECB needs big shock to reverse decision to end bond buys - Lane
RE
06/19Draghi Says ECB Could Restart Bond Buying-Program If Required -- 3rd Update
DJ
06/19Britain may issue more 50-year bonds this year, debt office chief says
RE
06/19Draghi Says ECB Could Restart Bond Buying-Program If Required -- 2nd Update
DJ
06/19Bank of England to keep rates steady as winter chill slow to lift
RE
06/18As Interest Rates Rise, Real-Estate Stocks Lose Luster
DJ
06/15ECB's Bond Buying Could Return If Economic Downturn Occurs, Official Says
DJ
Latest news "Interest Rates"
Advertisement