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Euro zone Bond Yields Slip; German GDP Falls more than Expected

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A lessening of inflation fears saw euro zone government bond yields edge down for the third day in a row on Tuesday, as the market continued to calm down from last weeks selloff.

Last week, Germanys 10year Bund yield rose to twoyear highs, while Italian yields rose to their highest since September, as investors bet stronger economic growth could prompt the European Central Bank to slow the pace of its emergency bond purchases soon.

But yields started falling on Friday when ECB President Christine Lagarde said it was still too early for the ECB to discuss tapering the stimulus.

The German economy shrank more than expected in the first quarter as coronavirusrelated restrictions spurred householders to put more money than ever into savings, data showed on Tuesday.

Core yields were down around 2 basis points bps in early London trading. Germanys benchmark 10year Bund yield was at 0.154 at 0714 GMT, its lowest in 13 days.

Italys 10year yield dropped below 1 for the first time since May 13, and was down 2 bps at 0.9984.

U.S. Treasury yields likewise were a touch lower after Federal Reserve officials made dovish comments, affirming support for keeping monetary policy unchanged.

Germanys Ifo business climate survey for May is due at 0800 GMT and is expected to show improvement.

Todays data flow should stay upbeat with the Ifo set for another improvement. Importantly, unlike in previous months the service and trade sectors should drive the uptick this time, reflecting…

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