Euro area yields on track for a flat week before Powell testimony
By Stefano Rebaudo
Aug 23 (Reuters) -Euro zone government bond yields were set to end the week roughly unchanged as a rise after Thursday's economic data offset the previous fall.
Borrowing costs snapped a four-day falling streak on Thursday, while bets on the European Central Bank's easing cycle held steady after the euro area's figures.
Euro zone fixed income markets tracked moves in U.S. Treasury yields, which dropped as investors expected dovish remarks from Federal Reserve Chair Jerome Powell at Jackson Hole, due on Friday at 1400 GMT.
Germany's 10-year yield DE10YT=RR was up 0.5 basis points (bps) at 2.25%. It was set for a one bp weekly fall.
Some analysts argued that Powell's testimony risks being a non-event as it has been in focus for weeks.
They said the bar for a dovish surprise was quite high, with markets pricing in 97 bps of Fed rate cuts FEDWATCH by year-end and 190 bps by July 2025.
Money markets kept pricing around 65 bps of ECB rate cuts by year-end EURESTECBM3X4=ICAP, implying two easing moves and a 60% chance of a third cut.
"Our June projections assumed two more rate cuts this year, and right now, I don't see any reason why we shouldn't follow through," ECB policymaker Martins Kazaks said on Friday.
Euro zone consumers' inflation expectations over the next 12 months remained steady for the third month in July, an ECB survey showed on Friday.
Investors were still assessing the impact of Thursday's economic figures.
Analysts said the positive impact of the Paris Olympic Games on French service sector sentiment, which rose by 4.9 points to 55.0, was a key – and probably temporary – driver of the positive surprise in the euro area PMIs.
Euro zone negotiated wage growth slowed to 3.55% in the second quarter from 4.74% three months earlier, primarily because of a major slowdown in Germany.
"For the third quarter, this index (a Citi wage tracker) suggests a sharp re-acceleration in German negotiated wages growth from 3.4% back to 5.7%, mainly due to a 1,000 euros one-off payment in the wholesale sector in August," said Christian Schulz, a European economist at Citi.
He argued that the second quarter decline was entirely due to a drop in German wage growth, driven by volatile one-off payments.
Italy's 10-year government bond yield IT10YT=RR, the benchmark for the euro area's periphery, dropped one bp to 3.60%, with the yield spread with its German peers DE10IT10=RR at 135 bps.
The gap between German and French borrowing costs, a gauge of the risk premium investors demand to hold France's government bonds, was at 71 bps. It hit 88 bps in early August, its highest since 2012, and reached 85 bps during French elections.
Investors are closely watching political developments in France as President Emmanuel Macron faces a tough job.
Parliamentary approval of the 2025 budget is one of many challenges at a time when France is under pressure from the European Commission and bond markets to reduce its deficit.
Macron began meeting party leaders on Friday with the aim, nearly seven weeks after inconclusive parliamentary elections, to finally give the country a new prime minister.
Reporting by Stefano Rebaudo; Editing by Clarence Fernandez
Mga Kaugnay na Asset
Pinakabagong Balita
Disclaimer: Ang mga kabilang sa XM Group ay nagbibigay lang ng serbisyo sa pagpapatupad at pag-access sa aming Online Trading Facility, kung saan pinapahintulutan nito ang pagtingin at/o paggamit sa nilalaman na makikita sa website o sa pamamagitan nito, at walang layuning palitan o palawigin ito, at hindi din ito papalitan o papalawigin. Ang naturang pag-access at paggamit ay palaging alinsunod sa: (i) Mga Tuntunin at Kundisyon; (ii) Mga Babala sa Risk; at (iii) Kabuuang Disclaimer. Kaya naman ang naturang nilalaman ay ituturing na pangkalahatang impormasyon lamang. Mangyaring isaalang-alang na ang mga nilalaman ng aming Online Trading Facility ay hindi paglikom, o alok, para magsagawa ng anumang transaksyon sa mga pinansyal na market. Ang pag-trade sa alinmang pinansyal na market ay nagtataglay ng mataas na lebel ng risk sa iyong kapital.
Lahat ng materyales na nakalathala sa aming Online Trading Facility ay nakalaan para sa layuning edukasyonal/pang-impormasyon lamang at hindi naglalaman – at hindi dapat ituring bilang naglalaman – ng payo at rekomendasyon na pangpinansyal, tungkol sa buwis sa pag-i-invest, o pang-trade, o tala ng aming presyo sa pag-trade, o alok para sa, o paglikom ng, transaksyon sa alinmang pinansyal na instrument o hindi ginustong pinansyal na promosyon.
Sa anumang nilalaman na galing sa ikatlong partido, pati na ang mga nilalaman na inihanda ng XM, ang mga naturang opinyon, balita, pananaliksik, pag-analisa, presyo, ibang impormasyon o link sa ibang mga site na makikita sa website na ito ay ibibigay tulad ng nandoon, bilang pangkalahatang komentaryo sa market at hindi ito nagtataglay ng payo sa pag-i-invest. Kung ang alinmang nilalaman nito ay itinuring bilang pananaliksik sa pag-i-invest, kailangan mong isaalang-alang at tanggapin na hindi ito inilaan at inihanda alinsunod sa mga legal na pangangailangan na idinisenyo para maisulong ang pagsasarili ng pananaliksik sa pag-i-invest, at dahil dito ituturing ito na komunikasyon sa marketing sa ilalim ng mga kaugnay na batas at regulasyon. Mangyaring siguruhin na nabasa at naintindihan mo ang aming Notipikasyon sa Hindi Independyenteng Pananaliksik sa Pag-i-invest at Babala sa Risk na may kinalaman sa impormasyong nakalagay sa itaas, na maa-access dito.