Euro zone yields dip ahead of data-packed Jackson Hole week

Reuters

Euro zone yields dip ahead of data-packed Jackson Hole week

2024 8월 16, 오후 2:56 GMT

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Updates at 1450 GMT

By Yoruk Bahceli

Aug 16 (Reuters) -Euro zone bond yields edged lower on Friday following a U.S. data-driven jump a day earlier, with investors bracing for a week packed with economic data and a meeting of top central bankers in Jackson Hole.

Germany's 10-year yield DE10YT=RR, the benchmark for the bloc, was down 1.5 basis points at 2.25%. That followed a jump of nearly 9 bps on Thursday on the back of strong U.S. data that boosted confidence in the world's largest economy. Bond yields move inversely to prices.

Weaker-than expected U.S. jobs data earlier in August had fanned worries about a potential U.S. recession, sending bond yields tumbling as traders bet on steeper U.S. Federal Reserve rate cuts.

But yields have rebounded on better-than-expected data in recent days, with investors reducing their bets on a 50 bps Fed rate cut in September.

Despite big intraday moves, the German 10-year yield was set to end the week just two basis points higher, and down just 4 bps so far in August, highlighting the extent of price swings.

Next week investors will scrutinise business activity data for further clues on the extent to which euro zone growth is faltering, and also second quarter negotiated wage growth data that the European Central Bank will look at before its September rate decision.

Central bankers from around the globe will gather in Jackson Hole from Thursday for the Fed's annual conference. Fed chair Jerome Powell's messaging on the bank's September move will be in particular focus.

"Bond markets are facing a reality check as major central bankers are about to give their interpretation of recent data and events, which has led to a profound re-pricing of central bank expectations," said Christoph Rieger, head of rates and credit research at Commerzbank.

On Friday, traders were betting on a more than 95% chance of a 25-bp ECB rate cut in September and around 65 bps of cuts by year-end.

That means they are fully pricing in a second and a third rate cut this year, and see around a 60% chance of the ECB's easing cycle, which started in June, extending to a fourth cut.

As recently as mid-July, traders had not been fully convinced of a third cut this year.

Italy's 10-year yield IT10YT=RR was down 1 bp at 3.63%, with the closely-watched risk premium, or spread, it pays over the German equivalent at 138 bps, near two-week lows. DE10IT10=RR

The spread widened as far as 154 bps earlier this month, but has dropped back as other riskier assets like equities and corporate bonds recovered from their sharp selloff in early August.

Reporting by Yoruk Bahceli; Editing by Kirsten Donovan and Emelia Sithole-Matarise

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