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Euro Zone Bond Selloff Pauses as Fed Plays Down Taper Talk

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LONDON, April 29 Reuters Euro zone government bond yields were anchored below twomonth highs on Thursday after policymakers in the United States suggested they would keep the stimulus taps flowing for now even in the face of a growing economy and rising inflation.

The possibility of a tapering of bond purchases from the worlds most powerful central bank had sparked a sharp selloff in the worlds major government bonds including in the eurozone in recent weeks and especially on Wednesday.

But investors received some reassurance from Fed Chair Jerome Powell after the conclusion of a meeting of ratesetters on Wednesday that the U.S. Federal Reserve would not imminently reduce its support of the U.S. economic recovery .

Powell retained a strongly dovish tone despite an upgraded view of the economy, repeating the transitory nature of the upcoming inflation, concentrating on the progress outstanding in the labour market, and pushing back against any mention of tapering, Mizuho analysts said in a note.

The yields of highgrade euro zone bonds were a touch higher on Thursday, but still short of Wednesdays highs. Germanys 10year bond yield, the benchmark for the bloc, was up half a basis point at 0.228, having climbed to 0.203 in the previous session.

Mizuho believes this benchmark bond yield could be pushed to the 0.15 mark some time in the second quarter.

INFLATION DATA

The closelywatched ItalyGermany 10year bond yield spread tightened to 105 basis points, inside this…

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