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Euro Zone Bond Yields Steeper, Prepared for One Biggest Weekly Selloffs

Euro region bond yields went down on Friday after their worst one-day selloff in over a year as easing global tensions, with a warning ahead of a crucial ECB meeting and stronger U.S. data all moderating demand for fixed revenue.

Records showing Germany industrial output unexpectedly declined in July served as a note that financial conditions in the single currency bloc remain timid and that central bank easing is on its way.

However, having declined fast and furiously for months, yields across central bond markets have shot up this week as news that the US and China will resume trade dialog, the new government formation in Italy and easing concern about a no-deal Brexit hurt demand for safe-haven assets.

Feedback from European Central Bank officers in the meantime has moderated expectations for aggressive smoothening at next week’s policy meeting, falling bond yield curves.

Germany’s 10-year bond yield dropped 2 basis points in early session to -0.61%, having soared 8.5 basis points on Thursday in its most significant one-day climb since June 2018.

It’s up to ten bps on the week and set for one its highest weekly jumps of the year thus far. Germany’s 30-year bond is inside a striking distance of optimistic yield territory.

Within the U.S. Treasury market, the conversion of the U.S. yield curve — a key recessionary indicator — has been halted, with short-dated bond yields back under long-dated ones.

Based on an earlier report this week, many ECB delegates favor restarting asset buys; however, opposition from some northern European nations is complicating this subject.

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