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Eurozone Bond Yields Drop Sharply as Markets Reprice ECB Rate Outlook

Saturday, July 23, 2022
Eurozone Bond Yields Drop Sharply as Markets Reprice ECB Rate Outlook © Reuters

By Geoffrey Smith

Investing.com -- Eurozone bond yields had their biggest daily drop since May on Friday, as weaker-than-expected business surveys and comments from European Central Bank officials combined to bolster hopes that the bank's policy tightening cycle will be over relatively quickly.

By 11:50 AM ET (1550 GMT), the yield on the benchmark 2-Year German government note, which is closely tied to expectations of ECB rates, was down 27 basis points at 0.39%, it lowest since the end of May. The analogous Italian note yield, which typically signals any fear of near-term stress in the Eurozone's fabric, was also down by 25 basis points, despite the collapse of Mario Draghi's government on Wednesday and the calling of new elections by President Sergio Mattarella.

The moves were triggered by various factors: the S&P Global purchasing managers index for the Eurozone showed the region's economy slipping back into contraction in June, falling to 49.4 from 52.0 in May. That's a level that would usually signal economic contraction, but analysts pointed out that the survey was taken before Russia resumed shipments of gas through the Nord Stream pipeline earlier this week. As such, it may reflect more pessimism than has actually been warranted by events since then. The index is subject to revision at the end of the month.

The second factor behind the drop was the ECB's publication of its professional forecasters' survey, which showed a sharp downward revision to expectations for Eurozone growth next year  - to 1.5% from 2.3% only three months ago. That doesn't even include the change in outlook caused by the ECB's own acceleration of its rate hike schedule this week: having guided for an increase of 25 basis points in its official rates at Thursday's council meeting, the ECB went further, hiking by 50 basis points to end a period of nearly nine years of negative rates. 

Those developments made markets sensitive to any suggestion that the ECB will stop hiking sooner as the economy weakens. One such suggestion came from Bank of France Governor Francois Villeroy de Galhau, who was quoted by newswires as saying that: "Starting the increase in interest rates faster does not mean that (the cycle of increases) will end higher."

Meanwhile, Slovakian central bank Governor Peter Kazimir, one of the ECB's more hawkish members, said in a statement that the next rate hike September could be only 25 basis points, rather than the 50 that many had started to expect after inflation overshot again to a new euro-era record of 8.6% in June. 

"After yesterday’s 50 basis points, we only expect the ECB to hike a further 50 basis points in total as recessionary pressures are already cooling the economy quite significantly," ING economist Bert Colijn said in a note to clients.

The ECB still doesn't predict a recession for the Eurozone over the next two years - a point that President Christine Lagarde emphasized more than once at her press conference on Thursday.

The euro was broadly unchanged from late Thursday at $1.0216, but on course for a modest weekly gain. 

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16-08-2022 20:26:54 (UTC+7)

EUR/USD

1.0161

+0.0001 (+0.01%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (9)

Sell (0)

EUR/USD

1.0161

+0.0001 (+0.01%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (9)

Sell (0)

GBP/USD

1.2066

+0.0011 (+0.10%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (5)

Sell (2)

USD/JPY

134.49

+1.16 (+0.87%)

Summary

Sell

Moving Avg:

Buy (4)

Sell (8)

Indicators:

Buy (2)

Sell (5)

AUD/USD

0.7008

-0.0014 (-0.20%)

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Neutral

Moving Avg:

Buy (8)

Sell (4)

Indicators:

Buy (1)

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USD/CAD

1.2889

-0.0015 (-0.12%)

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EUR/JPY

136.64

+1.19 (+0.88%)

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EUR/CHF

0.9650

+0.0036 (+0.37%)

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Gold Futures

1,789.85

-8.25 (-0.46%)

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Sell

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Silver Futures

20.017

-0.255 (-1.26%)

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Copper Futures

3.6208

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Crude Oil WTI Futures

88.69

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Brent Oil Futures

94.28

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Natural Gas Futures

9.228

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US Coffee C Futures

222.60

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Euro Stoxx 50

3,792.55

+2.93 (+0.08%)

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S&P 500

4,297.14

+16.99 (+0.40%)

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Neutral

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DAX

13,844.80

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FTSE 100

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Hang Seng

19,830.52

-210.34 (-1.05%)

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↑ Buy

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US Small Cap 2000

2,020.40

+7.30 (+0.36%)

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↑ Buy

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IBEX 35

8,488.87

+61.87 (+0.73%)

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Neutral

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Sell (12)

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BASF SE NA O.N.

44.087

+0.027 (+0.06%)

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Bayer AG NA

54.08

+0.52 (+0.97%)

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Allianz SE VNA O.N.

179.39

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Adidas AG

170.22

-2.72 (-1.57%)

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Deutsche Lufthansa AG

6.726

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Siemens AG Class N

111.39

-0.81 (-0.72%)

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8.980

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Indicators:

Buy (1)

Sell (8)

 EUR/USD1.0161↑ Buy
 GBP/USD1.2066↑ Buy
 USD/JPY134.49Sell
 AUD/USD0.7008Neutral
 USD/CAD1.2889↑ Buy
 EUR/JPY136.64↑ Buy
 EUR/CHF0.9650↑ Buy
 Gold1,789.85Sell
 Silver20.017↑ Sell
 Copper3.6208↑ Sell
 Crude Oil WTI88.69↑ Sell
 Brent Oil94.28↑ Sell
 Natural Gas9.228↑ Sell
 US Coffee C222.60↑ Sell
 Euro Stoxx 503,792.55↑ Sell
 S&P 5004,297.14Neutral
 DAX13,844.80↑ Sell
 FTSE 1007,542.10↑ Sell
 Hang Seng19,830.52↑ Buy
 Small Cap 20002,020.40↑ Buy
 IBEX 358,488.87Neutral
 BASF44.087↑ Sell
 Bayer54.08↑ Sell
 Allianz179.39↑ Sell
 Adidas170.22↑ Sell
 Lufthansa6.726↑ Sell
 Siemens AG111.39↑ Sell
 Deutsche Bank AG8.980↑ Sell
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# So hôm qua # Chênh TG
SJC Eximbank6,580/ 6,680
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$ Tỷ giá Vietcombank
Ngoại tệMua vàoBán ra
USD23.230,0023.540,00
EUR23.145,5524.441,71
GBP27.456,8428.627,78
JPY171,08181,12
KRW15,4318,80
Cập nhật lúc 18:54:08 16/08/2022
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