German 10-year yield hits two-month high, focus on supply
September 16 (Reuters) – The German 10-year yield hit a new two-month high on Thursday as issuance was set to resume.
Austria has started selling a new 15-year bond under syndication, according to a note from the senior manager seen by Reuters.
During the auctions, Spain will raise 5.5 billion euros in bonds maturing in 2024, 2026 and 2031.
France will raise up to € 9 billion in bonds due 2024, 2026 and 2027, and up to an additional € 2 billion from inflation-linked bonds due 2026, 2031 and 2040.
The German 10-year yield, the benchmark for the block, hit a two-month high at -0.293 and rose less than a basis point to -0.30% at 07:22 GMT.
Michael Leister, head of interest rate strategy at Commerzbank, said the heavy supply this week is likely weighing on German bonds, which accelerated their underperformance against US Treasuries this week.
The spread between German and US 10-year yields narrowed by six basis points this week, putting German bonds on track for their biggest weekly underperformance against US Treasuries since mid -June.
At 161 bps, the spread is close to the tightest since the end of July.
The focus will also be on the President of the European Central Bank, Christine Lagarde, who is due to speak at 12:00 GMT. The ECB last week decided to slow its purchases of emergency bonds in the event of a pandemic in the fourth quarter, but allayed fears of a potentially more hawkish move.
A flurry of US data, including retail sales expected at 12:30 GMT, will be another point of interest for bond investors.
Mizuho analysts said US data on Thursday could provide more clarity on the macroeconomic picture ahead of next week’s US Federal Reserve meeting, which will also be a key event for Eurozone bonds, which move often. in tandem with US Treasuries.
The data follows Tuesday’s U.S. inflation data, which showed consumer prices rose slightly more slowly than expected in August, further evidence of policymakers’ belief that currently high inflation is transitory.
“A mixed data conclusion should leave expectations for the meeting unchanged, but a set of positive surprises… could improve the situation for the Fed’s hawks,” Mizuho analysts wrote. (Report by Yoruk Bahceli Editing by Raissa Kasolowsky)