Tag Archives: Eurozone

UPDATE sells Euro-2 zone bonds; Italy has set the best month since May | Instant News

* Eurozone periphery government bond yields tmsnrt.rs/2ii2Bqr (Updates throughout)

By Elizabeth Howcroft

LONDON, July 31 (Reuters) – Eurozone government bonds were sold on Friday, both in the core and periphery, with Italian 10-year bonds set as the worst day since early May but still producing strong performance throughout the month.

With the market widely cautious on Friday, analysts said the sell-off could be triggered by an unusual month-end flow.

“I attribute it to long-term, long-term positions from dealers who may be mistaken because of the sale of real cash flow,” said Peter Chatwell, chief of multi-asset strategy at Mizuho.

Analysts were surprised by the move, because the month-end index extension – where funds rebalanced their portfolios to reflect activity during the month – was expected to support bonds at the start of the session.

Italian 10-year yields are at their highest level in more than a week, up 6 basis points (bps) at 1.092% at 1449 GMT.

However, Italian bonds have experienced a decent month, with yields set down 24 bps in July – the best month since May. The paper demand was driven by recovery funds agreed by the European Union last week.

The 750 billion euro fund, which will partly be offered as a grant to the member states hardest hit by the coronavirus, has been hailed as a game changer for the eurozone and has increased Italy’s debt, given concerns about the country’s sustainability. loan.

Italy’s risk premium pays Germany for 10-year debt falling to March lows when the fund was agreed, although it has risen again this week, and is 3 bps wider on Friday at 160.65 bps.

Mizuho Chatwell said the Italian rally that was easing this week could be due to oversupply.

“What happened to BTP was a bit exhausted after recording a number of supplies,” he said.

“I think the market is now saturated with this positivity, but supply continues to run,” he added.

The 10-year German Bund benchmark was set for the best month since April, as investors flocked to safe-haven debt, pushing yields below -0.5%.

Safe-haven bonds are likely to remain supported given the increasing number of coronavirus cases around the world, raising fears of new lockouts.

Global fund managers prefer to cut equities to their lowest level in four years in July while keeping bond allocations unchanged, as hopes for economic recovery fade, a Reuters poll shows.

Data on Thursday revealed a record contraction in Germany – the region’s leading economy – and sent Bund results to two and a half month lows, but there was little reaction on Friday to the euro zone GDP estimates.

But euro zone inflation suddenly rose in July, supporting the European Central Bank’s expectations that negative headline readings could be avoided. (Reporting by Yoruk Bahceli and Elizabeth Howcroft; editing by Gareth Jones and Mark Potter)


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Why is the Netherlands ready to lead the opponents of the European Union after Britain came out | Instant News

“Support from the left is not a problem for him,” said Bart van den Braak, professor of public law at the University of Maastricht and a researcher at the Montesquieu Institute think tank. “The party itself [the Liberal VVD] It used to be somewhat pro-European but now is more skeptical, partly because its opponents are new right parties. That was what he had to consider: that they would not consider him too pro-European. “

In fact, Rutte was not known for his principles, but as a deal-maker who changed his form. “Dr. No, No, No is not something he has publicly shown in the Netherlands: it is a position he has taken in Europe, especially over the past few months,” said Van der Meer, who showed that Rutte had managed three political coalition governments that very different. “In the Netherlands you should describe it as a manager that allows others to shine, who can change tactics or position if necessary. It is useful in fragmented countries. “

Another side effect of the Dutch system, which has a four-party government and 15 separate groups in parliament, is a personality problem. “In public, he is always very friendly and I think most people like him, even his opponents … even though I don’t know about Mr Orban [the Hungarian prime minister who recently said Rutte hated Hungary], “Said Van den Braak.

Without a parliamentary majority, for example, Rutte was recently forced to appeal to the common sense of people to manage Covid-19’s “smart locking” – and he still benefits from increasing popularity, according to Van der Meer’s research.

“Rutte’s personal popularity has increased slightly, with a rally around the flag, a large increase in confidence in the government and a reduction in cynical feelings about politicians,” he said. “His party has jumped in opinion polls and we know from other studies that this encouragement gives you more free time with the public: they are more likely to support your policy, be it lockdown or 1.5 million people, and maybe also its position regarding European Collaboration. “

The only major criticism in the Netherlands came from Wilders and the Socialist Party (SP). Mahir Alkaya, a spokesman for financial affairs for the SP, said his party supported a much smaller “solidarity” fund many months ago than taking cash by the European Commission.

“We see that the European Commission is using this opportunity to attract more money to provide subsidies and loans,” he said. “Rutte has tried to form opposition, and I really praise it, but he was unsuccessful. There are many things in the fund that have nothing to do with corona, but the commission has used momentum to move forward with things like ambition for digitalization.

“Rutte is a true Liberal and we can imagine him feeling the loss of Britain in these negotiations.”


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The German Bund Safe-haven is supported by US / Chinese tensions | Instant News

* Eurozone periphery government bond yields tmsnrt.rs/2ii2Bqr

By Dhara Ranasinghe

LONDON, July 27 (Reuters) – The benchmark 10-year German bond yield slumped Monday as a sign that jitters in world markets over rising US / China tensions pushed investors into safe haven assets.

China took over the place of the US consulate in the southwestern city of Chengdu on Monday, after ordering the facility to be vacated in retaliation for last week’s dismissal from its consulate in Houston, Texas.

Worsening relations between the two biggest economies in the world pushed safe havens such as gold and government bonds, allowing German debt to recover from price losses on Friday triggered by stronger-than-expected purchasing manager data (PMI).

Yields on German 10-year bonds were last down about 1.5 basis points at -0.456%, after rising 4 bps on Friday.

“Risk assets are struggling … while for the Bunds the textbook reaction to the PMI combined with another failed test of the -0.50% level leaves 10-year results in the middle of the range,” said Commerzbank pricing strategist Michael Leister.

Italian bond yields are slightly lower, with sentiment towards the periphery supported by increasing confidence that aggressive fiscal and monetary stimulus in the euro area will help dampen its economy from coronavirus attacks.

Yields on Italian 10-year bonds dipped to 1.06%, holding close to the lowest level of 4-1 / 2 months last week. The gap over the 10-year benchmark German Bund yields briefly narrowed to around 148 bps, the most stringent in five months.

European Union leaders last week reached an agreement on a 750 billion euro ($ 878 billion) COVID-19 recovery fund, agreeing to raise billions of euros on the capital market on behalf of all 27 countries, in an act of unprecedented solidarity.

“We think that (the spread of Italian / German bond yields) can tighten 15-20 bps from here, the amount becomes less important than the direction,” said Jorge Garayo, senior level strategist at Societe Generale. “This recovery fund is important because it marks a very important step towards something that was previously taboo – fiscal transfers.”

$ 1 = 0.8542 euros Reporting by Dhara Ranasinghe Editing by David Holmes


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UPDATE 2-Italian bonds are set for the best week in two months | Instant News

* Italian 10-year bond yields fell 16 bps this week

* Set for the biggest weekly decline in 2 months

* German Bund results briefly touched 2-month lows of -0.499%

* Eurozone periphery government bond yields tmsnrt.rs/2ii2Bqr (Add comments, update prices to close)

By Dhara Ranasinghe

LONDON, July 24 (Reuters) – The Italian bond market is ready for the best week in two months on Friday, even as borrowing costs rise from 4-1 / 2 month lows set after this week’s agreement on a European Union recovery fund to support the economy hit by coronavirus.

Bond yields across the euro zone rose after data showing eurozone business activity recovered in July and signs of rising US / Chinese tensions prompted investors to take profits on rising prices this week and yields fell.

Yields on Italian 10-year bonds rose 2 basis points to 1.07%, from Thursday’s low of around 1.04%.

However, Italian yields fell around 16 bps this week, set for the biggest weekly decline in two months. According to Tradeweb data, Italian 10-year bond yields fell below 1% on Thursday for the first time since March.

Yields on Spanish and Portuguese 10-year bonds are down about 6 bps this week, Greek yields have fallen 10 bps.

“The impact of the recovery fund is not fully appreciated and is still not fully appreciated,” said Peter Chatwell, head of multi-asset strategy at Mizuho. “The structural part of this story is that it allows the risk of the euro to split to a level that has not been seen for some time.”

In Germany, yields rose from two-month lows after the euro zone flash Composite Purchasing Managers Index (PMI), seen as a good indicator of economic health, rose to 54.8, the highest since mid-2018 and above forecasts. The final reading for June is 48.5.

The 10-year Bund yield held up to 4 bps at -0.44%, after briefly touching a two-month low in early trade around -0.50% because German bonds also benefited from renewed optimism about the euro area.

Three forces seem to play a role – a strong fiscal response, an aggressive stimulus from the European Central Bank, and a perception of better handling the health crisis versus the United States.

It also helped raise the euro to 21-month highs against the dollar this week.

European Union leaders on Tuesday approved a 750 billion euro recovery fund, which according to Italian Prime Minister Giuseppe Conte would allow his government to change Italy. Italy and Spain, the two countries hardest hit by the pandemic, are among the biggest beneficiaries of the agreement.

“We think the Recovery Fund is a key element for Europe’s response to the shock. The ECB is helping to cope with large funding needs but cannot replace every foreign investor in the periphery, “analysts at BofA said in a note.

Reporting by Dhara Ranasinghe; edit by Larry King and Steve Orlofsky


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Italian bonds are set for the best week in two months | Instant News

* Eurozone periphery government bond yields tmsnrt.rs/2ii2Bqr

By Dhara Ranasinghe

LONDON, July 24 (Reuters) – The Italian bond market is ready for its best week in two months on Friday, with borrowing costs holding near 4-1 / 2 month lows after an EU recovery fund agreement that will provide support to economies like Italy devastated by coronavirus.

Even US-Chinese tensions that have weighed on investor sentiment and world stock markets failed to place a significant decline in the southern European bond market, which tends to move in line with world risk assets.

Italian 10-year bond yields stabilized around 1.05%, holding near Thursday’s 4-1 / 2 lows at 1.04%. According to Tradeweb data, Italian 10-year bond yields fell below 1% on Thursday for the first time since March.

Italian bond yields have fallen 18 basis points this week and are set for the biggest weekly decline in two months. Yields on Spanish, Portuguese and Greek 10-year debt each fell by around 10 bps.

The German Bund result is a touch lower on Friday at -0.49%.

European Union leaders on Tuesday approved a 750 billion euro recovery, which according to Italian Prime Minister Giuseppe Conte would allow his government to change Italy. Italy and Spain, the two countries worst hit by the pandemic, are also among the biggest beneficiaries of the agreement.

In addition, aggressive stimulus from the European Central Bank and signs that the eurozone economy is recovering from coronavirus attacks have boosted investor sentiment towards regional assets. The euro is trading near 21-month highs.

This background encourages what is called a carry trade, where investors borrow at low interest rates and invest in higher yield assets such as Italian debt.

“Flash” Purchasing Managers’ Index of economic activity data in July released on Friday could provide another impetus for sentiment, analysts said.

“Today’s PMI must provide further confidence to catch carry,” said Michael Leister, tariff strategist at Commerzbank. (Reporting by Dhara Ranasinghe; Editing by Catherine Evans)


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UPDATE 1-Italian bonds change with the rest of the recovery funds | Instant News

* Eurozone periphery government bond yields tmsnrt.rs/2ii2Bqr (Recast with a step in Italian debt)

By Dhara Ranasinghe

LONDON, July 23 (Reuters) – Italian 10-year bond yields fell to a new 4-1 / 2 month low on Thursday, moving closer to 1%, due to growing confidence in the outlook for the euro zone after a recovery fund deal this week pushed southern Europe to improve southern Europe’s debt.

Yields on ten-year bonds in Italy – the eurozone’s biggest bond market in terms of outstanding debt – have fallen 17 basis points this week, set for their best week in two months. When bond prices go up, the results go down.

The closely watched gap between Italian and German 10-year bond yields touched 154.50 bps, the narrowest level since late March.

An aggressive European Central Bank stimulus has helped reduce borrowing costs across the eurozone. This together with the European Union’s 750 billion euro recovery fund has eased concerns about the future of Italy which is deeply indebted, one of the European countries hardest hit by coronavirus.

“The ECB and now the recovery fund have ensured that structural problems are no longer the main determinant of peripheral yields and spreads, which means that peripheral debt will perform in line with broader risk assets,” said Richard McGuire, chief interest rate at Rabobank.

“The recovery fund agreement has boosted risk appetite and thus encouraged further rallies at the peripherals but, strikingly, was not accompanied by higher core results. For us, this reflects the fact that funds are more symbolically important than reflecting debt mutualization. ”

Yields on Italian 10-year bonds fell 3 bps to around 1.07%, the lowest level since early March.

Yields on five-year debt fell below 0.5% for the first time since early March, two-year yields had reached a new low of 4-1 / 2 months at -0.067%.

Bond yield spreads in France, Spain and Portugal all narrowed this week versus Germany to the most stringent level in weeks.

The benchmark 10-year German bond yields hold near Wednesday’s two-month lows around -0.50%, with safe-haven assets supported by renewed tensions between the world’s biggest economies when Washington on Wednesday ordered Beijing to close its consulate in Houston.

Senior ING strategist Antoine Bouvet said the fact that the market ignored positive news about the COVID-19 vaccine earlier this week but reacted to signs of US / Chinese tension was a reflection of market position.

“To put it more explicitly, we suspect investors might try to reduce their risk exposure to the summer months,” he said.

Reporting by Dhara Ranasinghe; Editing by Toby Chopra


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UPDATE 2-Italy yields rise from lows after a European Union recovery agreement | Instant News

(Correcting days in the first paragraph to Tuesday)

* Eurozone periphery government bond yields: tmsnrt.rs/2ii2Bqr

By Elizabeth Howcroft

LONDON, July 21 (Reuters) – Eurozone bonds were sold on Tuesday, with Italian yields rising again after reaching the lowest level since early March in early London trade after European Union leaders agreed on a massive coronavirus recovery fund to support the bloc.

The European Union approved 750 billion euros ($ 860 billion) in the early hours of Tuesday after a long summit that lasted nearly five days. The agreement was welcomed by the market as a significant step in shoring up the eurozone economy against the shock of COVID-19.

In a compromise agreement, the package will consist of 390 billion euros in grants – less than the previously targeted 500 billion euros – and 360 billion euros in cheap loans.

The economy that is driven by Italian tourism is among the most severely affected by this virus. Prime Minister Giuseppe Conte said that 28%, or 209 billion euros, would be for Italy, giving the country the opportunity to “start over with force”.

Yields on Italian 10-year government bonds, which have dropped 70 basis points in anticipation of funds since it was first proposed on May 18, fell further on Tuesday morning. It reached 1.117% – the lowest since the first week of March – before recovering to 1.172% at 1457 GMT.

It was set to end the day for the first time after seven consecutive falls.

The spread between core and peripheral yields was tightened, with 10-year German-Italian yields approaching the narrowest in four months before widening again to around 162 basis points. .

“With protracted negotiations being avoided, we see the way cleared for the 10Y Italy-Germany deployment through our 150bp target this summer,” ING strategists wrote in a note to clients.

“The benefits of bringing in peripheral debt, and lower prospective volatility thanks to ECB intervention, make it a superior alternative to core bonds, in our view.”

The spread of Portuguese and Greek in Germany is also getting tougher.

German, French and Dutch results edged up around 1 basis point but were largely unchanged by the news. The German 10-year yield is at -0.454%, after moving in a narrow range of 12 bps so far this month.

“It is possible that the extraordinary non-compliance of the Bunds in the face of peripheral rally reflects the fact that the division of responsibilities promised by the IMF is even more tokenistic than it appears,” wrote Rabobank-level strategists.

The market takes confidence not only from the size of the fund itself but also from demonstrations of solidarity and debt sharing between EU countries.

But European Central Bank Vice President Luis de Guindos said on Tuesday that a new wave of the coronavirus crisis in areas such as the United States, Latin America and parts of Asia could reduce European growth.

ECB board member Isabel Schnabel was quoted on Tuesday as saying that investors should not read too much about decreasing ECB bond purchases, because they could increase later. He said that the ECB would likely use the entire bond purchase quota. ($ 1 = 0.8707 euros)

Reporting by Elizabeth Howcroft; Editing by Alison Williams


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Italy is the biggest winner in a € 750 billion EU rescue deal | Instant News

Brent crude also hit a four-month high and stocks rose in support of the agreement.

The rescue agreement will see the European Commission borrowing funds on the financial markets and return them for the next 38 years through the EU budget. It did not meet the original proposal – pushed by Italy – for a fully recognized European Union debt known as “coronabonds”.

Experts say the joint loan marks a significant departure for the EU after years of caution from members like Germany.

Christoph Weil, economist at Commerzbank, said: “For the first time in its history, the EU was allowed to raise its own debt on a larger scale. This is the first decisive step towards debt mutualization. In future crises, the obstacles for the EU to take on further debt will be much lower.

“The EU is moving further towards the transfer union. Whether all EU countries are ready to take this path is doubtful in view of resistance from the ‘North’. “


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Italian bond yields fell to lows in early March as the potential for a EU recovery fund deal grew | Instant News

* Eurozone periphery government bond yields tmsnrt.rs/2ii2Bqr

By Yoruk Bahceli

AMSTERDAM, July 20 (Reuters) – Italy’s borrowing costs fell to the lowest level since early March on Monday when signs of a potential agreement began to emerge from a full EU summit aimed at approving a 750 billion euro economic recovery fund.

The proposed fund, which envisages the division of responsibilities in offering grants to the hardest hit countries, has been the main driver of the rally in South European bonds led by Italy since May, following an initial proposal, similar to a Franco-German one.

The summit, which was originally scheduled for Friday and Saturday, stretches to Monday when the fiscal-led countries of the Netherlands strongly reject the size of grants for the countries most affected and demand conditional assistance in economic reform.

But this week’s agreement looks likely after Bloomberg News reported that “thrifty” countries were prepared to receive 390 billion euros from funds offered as grants and the remainder as loans – less than € 500 billion in grants originally proposed by the European Union.

Diplomats had previously told Reuters leaders that they might leave the summit and try again to reach an agreement next month. The summit is postponed from Monday to 1600 CET (1400 GMT).

After the market last week assessed the prospect of an agreement reached at the weekend increasingly unlikely, Italian bonds rallied to the latest optimism at the opening session.

Italian 10-year yields dropped to the lowest level since March 9 at 1.19%, erasing many coronavirus sales which pushed them as high as 3%. Last down 4 basis points today at 1.21%

That reduced the closely watched risk premium Italy paid for its 10-year debt over Germany to its lowest level since the end of March at 163 bps.

“This is very much material, meaning that there will be significant support going forward. But I think what is more important than the current package size is the funds implemented (altogether), “said Peter Chatwell, head of multi-asset strategy at Mizuho in London, who hopes the deal might be sealed later Monday.

But Chatwell also warned that negative headlines surrounding the terms could cancel some of the gains in further trading.

“If there are more rigid and unpleasant conditions, which are more related to the conditions of stability and growth of the pact, or conditions that are usually associated with a bailout agreement, which will break the gap in positivity.”

German 10-year safe-haven yields rose 2 basis points to -0.44%. (Reporting by Yoruk Bahceli Editing by Mark Heinrich)


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UPDATE 1-Italy long-term yields around the lowest since March when the European Union summit begins | Instant News

* Eurozone periphery government bond yields tmsnrt.rs/2ii2Bqr (Update prices, add the latest news, comments)

By Olga Cotaga

LONDON, July 17 (Reuters) – Italian long-term government bond yields hovered around the lowest level in several months on Friday, the first day of the European Union summit in which member states debate the 750 billion euro recovery fund.

Opinions about possible outcomes of the summit range from agreements close to the original proposal to no agreement and follow-up meetings later.

ING analysts, like many in the market, expect some progress will be made this weekend, but will stop the final agreement. ING envisions a compromise of around a 600 billion euro package divided in equal parts between grants and loans, he said.

Dutch Prime Minister Mark Rutte said on Friday he saw less than 50% chance that European leaders would reach an agreement on the European Recovery Fund at their summit in Brussels, echoing comments from other European leaders for a week.

Given the growing doubts a deal will be signed this weekend, this month’s agreement is based more on grants than loans “will be positive for the market,” said Peter Chatwell, head of European tariff strategy at Mizuho.

He said this would open the door for the spread of German-Italian yields to shrink to pre-coronavirus levels and return to 120 bps in three to six months.

Some richer northern European countries oppose giving money through grants.

The BTP-Bund spread – the premium paid by Italy for the results of the German Bund’s safe-haven – last at 171 bps, close to the lower end of this year’s trading range

Italy’s 10-year yields held up to 1.4 bps at 1.25%, hovering around the 16-week lows touched on Thursday, when the ECB assured the market that it would most likely use the full firepower of emergency bond purchases to overcome the economic blow from Pandemic covid19.

German 10-year yields stabilized at -0.47%.

“We expect progress (this weekend) but, except for a number of smaller countries, the benefits must be less than game changers. However, this method is clear for further tightening deployments, “ING analysts wrote in a note to clients.

“In numbers, a quick agreement will push the spread of 10-year German-Italian results towards our 150 basis point target by the end of the summer,” they said.

The summit will last until the weekend. ING analysts said they did not expect much in the soundbites during Friday’s session and advised against acting on those who showed up.

Reporting by Olga Cotaga; Editing by Alex Richardson and Barbara Lewis


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