Thursday May 28, 2015 Search
Weather | Athens
14o C
09o 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)  
Moody´s says Greek exit would change nature of euro
´Three-quarters of way´ to Greece deal, says Moscovici
Greek design picked for commemorative euro coin
ECB officials say no to easier funds for Greece now
Heavy rain hampers traffic, power supplies
Heavy rainfall led to traffic being interrupted on Pireos Street between Petrou Ralli and Chamosternas Streets in central Athens on Thursday. Stormy conditions also resulted in delays to the...
Anastasiades, Akinci agree on new crossings on divided island
The Greek and Turkish Cypriot leaders agreed Thursday to open more crossing points and link the mobile phone and electricity networks to help restore trust between their estranged communitie...
Inside News
SOCCER
Panathinaikos conquers PAOK through Tavlaridis goal
A Stathis Tavlaridis goal has brought Panathinaikos to practically within one point from clinching a spot in next season’s Champions League qualifiers, as the Greens made it three out of thr...
SOCCER
AEK Athens returns to top league after financial collapse
Greek club AEK Athens has just returned to the country's top soccer league, two years after financial collapse sent it to a lower league. One of the country's largest clubs, AEK sealed its s...
Inside Sports
COMMENTARY
Greece´s Cuban pathway to a parallel currency
The idea of a parallel currency for Greece is worthy of consideration, with even German Finance Minister Wolfgang Schaeuble broaching the possibility as Greece fails to reach an agreement wi...
COMMENTARY
Endless confusion and worry
The Holy See on Wednesday expressed its own view regarding the Greek crisis. Cardinal Pietro Parolin – the Vatican’s equivalent of prime minister – voiced his concern over ongoing negotiatio...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Moody´s says Greek exit would change nature of euro
2. ´Three-quarters of way´ to Greece deal, says Moscovici
3. Greek design picked for commemorative euro coin
4. Heavy rain hampers traffic, power supplies
5. Anastasiades, Akinci agree on new crossings on divided island
6. Greek gov´t says hopes for deal with lenders by Sunday
more news
Today
This Week
1. Endless confusion and worry
2. G-7 weighs in on Greece as Tsipras government told to be serious
3. ECB's Nowotny says no to loosening funding for Greece now
4. Lagarde says still much work to do in Greek debt talks
5. Following up on a positive step
6. European shares edge lower as Greek deal optimism fades
Today
This Week
1. Conspiracy madness
2. Hotel contracts with a ‘Greek default clause’
3. Neither Grexit nor a dual currency will solve Greece’s problems
4. Some 300 mln left banks on Tuesday
5. No more 'quick and dirty' fixes for Greece
6. Merkel said to plan address for Greece if deal reached
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2015, H KAΘHMEPINH All Rights Reserved.