German bund yields drop on ECB QE anticipation

Tuesday, March 10, 2015

German government bond yields fell substantially yesterday as investors positioned themselves ahead of the long anticipated QE programme from the ECB. Ten year bund yields fell just over 8bp towards 0.3% on Monday as signals that the central bank was ramping up its bond buying programme prompted investors to rebalance portfolios ahead of any anticipated shortage in government bond supplies. The sentiment was echoed across eurozone government issues with French, Dutch and Belgian ten year yields all pulling back roughly around 10bp and activity this morning has seen additional downward pressure with ten year bund yields back below 0.3% as it targets the recent low towards 0.283%.

The euro held around an eleven year low against the dollar as it struggled to recover some of Friday’s precipitous losses, trading around 1.08-1.09 against the dollar for much of the day. Diverging fortunes between the US and eurozone have seen the dollar gain 11.4% against the euro since the start of the year and 22.4% over the past twelve months as investors pile into the greenback on optimistic US economic growth prospects.   

Asian equities struggled to hold onto near term support levels overnight as momentum from the US session failed to carry over to Asian trading. Chinese mainland stock indices pared some of the previous session’s gains despite CPI rising from a five year low of 0.8% to 1.4% y/y in February as producer prices registered a worse than expected drop. Factory gate prices in February fell by -4.8% y/y in February against expectations of a -4.3% decline as deflationary pressures continued to present significant headwinds to producers. Both the CSI 300 and Shanghai Composite closed 0.5% lower as investor confidence was hit.

10-year German bond yields pull back to record lows

GDBR10 Index Germany Generic Go 2015 03 10 07 37 31

EUR struggles to push higher after Friday's sell-off against USD

EUR Curncy Euro Spot Daily 10 2015 03 10 07 46 43

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Topics: ECB, EUR, CPI, Yields
More from: Kash Kamal