In Science and Space: German bond yields fell on Friday as markets stabilized a day after stronger-than-expected US inflation pushed bond yields higher. Stronger-than-expected U.S. inflation of 7.5% on Thursday pushed U.S. Treasury yields higher as traders increased bets on his 50-basis-point rate hike at the Federal Reserve next month. The sell-off spilled over into eurozone bonds, with his 10-year yield on eurozone benchmark Germany rising 7 basis points to its highest level since 2018. On Friday, the German 10-year yield reached 0.301% before falling about 3 basis points to 0.27% by 1110 GMT.
The euro zone bond market has been hit hard by European Central Bank President Christine Lagarde in an interview saying the current rate hike will not bring down the euro zone’s record high inflation, it will only hurt the economy. was also supported. Banks opened the door to rate hikes this year after last Thursday’s monetary policy meeting, pushing bond yields higher. Debt in Southern Europe, the biggest beneficiary of the ECB stimulus, also stabilized but continued to perform poorly on Friday.
Bond yields move inversely with prices. Other high-grade yields also fell by one to two basis points on the same day. “I think some consolidation is warranted, as you say after a big move like yesterday,” said Peter McCallum, rates strategist at Mizuho Bank London, adding that euro zone government bonds were generally lower on Friday. “It shouldn’t be surprising that the market will retreat a bit when it readjusts,” McCallum said in comments late Thursday by Fed policymakers Tom Birkin and Mary Daly. He seemed less hawkish than Mr Bullard.
After gaining 13 basis points on Thursday, Italian 10-year yields rose a whopping 5 basis points to 1.946%, the highest since May 2020, temporarily pushing a premium to the much-watched German yield of 166%. It surged to a basis point, hitting its highest level since July 2020. The move means Italy’s funding costs continue to rise, with Friday’s auction hitting its highest level since May 2020, with three bonds set to mature in 2024, 2029 and 2041 is due to the raising of €7.75 billion.