Eurozone bond yields drop as ECB quickens pace of easing

Tuesday, May 19, 2015

Eurozone bond yields fell further today as the ECB hinted that it may accelerate its €1 trillion bond buying campaign after previously pledging that there would be no early end to the plan. The decision from the central bank was prompted by the fact that liquidity is anticipated to drop over summer and saw yields across both short and long term maturities pull back as investors repositioned themselves back into government debt after a mass exodus earlier this month sent yields towards multi-month highs.

Ten year German government bond yields fell back towards 0.551% today after reaching a five month high of 0.777% earlier this month. Government borrowing costs are still some way off the historic lows seen in April when yields dropped towards 0.049% and could have further to fall as the ECB steps up its stimulative efforts, leading many market participants to believe that the recent spike in yields was overdone. A similar story could be seen for French and Italian long term government bond yields which turned lower, pulling back to 0.860% and 1.814% respectively.

After posting steady gains for the past five sessions spot gold prices are on track to snap the rally as investors pull out of the perceived safe haven in search of better returns. The precious metal had experienced strong investment demand over the past week, rallying over 4% as intraday moves on Monday saw prices push briefly above $1,232.44/oz. Downward pressure, in part owing to a stronger USD saw the yellow metal slip back towards $1,214/oz early on, testing near term support at the 200 day MA and we could see additional moves back towards $1,200/oz on any subsequent dollar gains. 

German bond yields extend declines

GDBR10 Index Germany Generic Go 2015 05 19 15 09 36

Spot gold prices snap recent rally

XAU Curncy Gold Spot Oz 2015 05 19 15 09 20

Topics: Gold, ECB, Yields
More from: Kash Kamal