Monday December 22, 2014 Search
Weather | Athens
13o C
8o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Eurozone bond yields hold at record lows after Spain inflation

By Marius Zaharia

Spanish inflation came in at minus 0.5 percent, higher than expectations of minus 0.6 percent but lower than in July. German inflation due at 1200 GMT was expected to be unchanged at 0.8 percent.

Overall, inflation in the euro zone is still sure to remain far from the ECB's target of just below 2 percent. Data for the region as a whole is due on Friday and is forecast to slip to 0.3 percent from 0.4 percent.

Such data is increasing speculation that the ECB will follow in the footsteps of the world's other major central banks and start pumping money into the flagging euro zone economy via an asset-buying programme, known as quantitative easing (QE).

In a landmark speech on Friday, ECB President Mario Draghi highlighted a significant fall in euro zone inflation expectations this month, dropping his strongest hint yet that a QE programme is possible over the next year.

"For the euro area, inflation may now be 0.3 or 0.4 percent but I don't think this one figure is of major importance, said Piet Lammens, a strategist at KBC in Brussels.

"What is important is that Draghi said that during August inflation expectations have dropped substantially."

German 10-year yields were last a touch lower on the day at 0.907 percent, just above a record low of 0.896 percent on Wednesday.

Most other euro zone yields were near their record lows, with Spanish 10-year bonds yielding 2.14 percent and the Italian ones yielding 2.38 percent.

ECB sources said that the central bank is unlikely to take new policy action next week unless August inflation figures show the euro zone sinking significantly towards deflation. link.reuters.com/fug72w

INFLATION EXPECTATIONS

The five-year, five-year forward breakeven rate - the ECB's preferred measure of what the market thinks the inflation outlook is - has picked up since Draghi's speech in Jackson Hole.

The rate, which now shows roughly where investors expect forecasts of inflation for 2024 to be in 2019, had fallen by roughly 20 bps in less than a month before those remarks and was approaching its 2010 record lows of around 1.90 percent. It has since picked up to a shade above 2 percent.

Other measures still show very low long-term inflation expectations. Ten-year inflation swaps stand at 1.5 percent, while five-year swaps trade at 1 percent.

Two-year German breakeven rates, derived from the yield gap between conventional and inflation-linked bonds, are negative. Ten-year breakeven rates at 1.26 percent are not far from Japan's 1.18 percent.

Low inflation or deflation may create problems for the euro zone's lowest-rated economies' efforts to cut their debts. However, QE prospects make those bonds attractive at this stage as the market sees the ECB as a likely heavy buyer at any price.

This, coupled with investors receiving coupon payments, is expected to ensure a smooth sale of up to 8 billion euros in five- and 10-year Italian bonds (BTPs) later in the day despite yields being at record lows.

"The BTP market remains firmly supported by various factors, not least growing expectations of further action by the ECB, Citi strategists said in a note.

[Reuters]

ekathimerini.com , Thursday August 28, 2014 (11:58)  
Spanish bond gains push yield to record low as Greek debt rises
Low costs, yield hunt to propel long-term euro zone bond sales in 2015
Greek current account deficit shrinks in October
Energy shares and Greek rebound lift European equities
Bomb hoax at SYRIZA HQ in central Athens
The threat of a bomb being planted at SYRIZAs headquarters in central Athens proved to be a hoax. The partys offices on Koumoundourou Square were evacuated at lunchtime on Monday after a c...
DIMAR not poised to break apart, insists spokesman
Democratic Lefts parliamentary spokesman Nikos Tsoukalis has rejected a report claiming that his party may be on the point of breaking apart. This report is so far from the truth that I do...
Inside News
SOCCER
Special day for Abidal, lucky one for PAOK
PAOK scraped through its Livadia challenge beating Levadiakos to remain on top of the Super League for Christmas, one point ahead of Olympiakos that enjoyed a great game at Kalloni and offer...
BASKETBALL
Explosive Barca unfazed by Panathinaikos, bomb scare
Panathinaikos lost 80-67 at home to Barcelona on Friday in a rather meaningless game at the end of the first group stage of the Euroleague, but the encounter will be remembered for the bomb ...
Inside Sports
INTERVIEW
Klaus Regling stresses debt sustainability through commitment to reforms
BRUSSELS The man who is responsible for the loans to Greece as managing director of the European Stability Mechanism (ESM/EFSF), Klaus Regling, is the only high-ranking European official w...
INTERVIEW
Crisis of confidence will come back again and again, says Thomas Piketty
Hes treated like a rock star wherever he goes to lecture. His book Capital in the 21st Century, a study on income and wealth inequality from the 18th century to the present, recently tran...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
RECENT NEWS
1. Bomb hoax at SYRIZA HQ in central Athens
2. DIMAR not poised to break apart, insists spokesman
3. SYRIZA offices in Athens evacuated after bomb threat
4. Spanish bond gains push yield to record low as Greek debt rises
5. Low costs, yield hunt to propel long-term euro zone bond sales in 2015
6. Greek parliament vote in balance after Samaras election offer
more news
Today
This Week
1. Euro shaky on ECB and Greece, dollar keeps edge
2. Government accuses SYRIZA and Independent Greeks of 'clear alliance'
3. Prosecutor gathers depositions in Independent Greeks 'bribe' probe
4. Draghi starts squaring QE circle in month of persuasion for ECB
5. Parliament's ethics committee to look into independent MPs' comments
6. Greek parliament vote in balance after Samaras election offer
Today
This Week
1. Samaras summons bond vigilantes with euro exit talk
2. High stakes
3. Europe's drama in Greece needs final act to avoid tragedy
4. A friendly yet firm message from Pierre Moscovici
5. On the edge but not gutless
6. Ship with 200 migrants off Pylos towed to Italy after passengers refuse to stop in Greece
Find us ...
... on
Twitter
... on Facebook
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright 2014, H KAΘHMEPINH All Rights Reserved.