Eurozone yields dip after Paris attacks
Euro zone bond yields dipped on Monday as some investors took shelter in safe-haven debt after Friday's attacks across Paris that killed more than 130 people.
Yields on two-year German bonds — the top-rated debt in the euro zone — hit a record low of -0.38 percent, while ten-year yields fell slightly to a two-week low of 0.54 percent.
In what was a relatively contained reaction from markets, the Japanese yen rallied and global stocks lagged.
"Following the terrorist attacks…it seems likely that – at least temporarily – risky assets, that were under pressure anyway, continue to trade with a weaker tone," RBC's chief European macro strategist Peter Schaffrik said.
Islamic State has claimed responsibility for Friday's suicide bombings and shootings, which also re-ignited a row over Europe's refugee crisis. French warplanes pounded Islamic State positions in Syria on Sunday.
While the social and economic repercussions of the attacks may not yet be known, analysts are expecting only a short-term impact in markets which have been buoyed by the prospect of monetary easing from the European Central Bank.
Data on Monday is expected to show inflation in the bloc at zero in the year to October, adding weight to bets that the ECB may deliver an interest rate cut and/or an expansion of its bond-buying programme at its meeting on Dec. 3.
Several ECB policymakers are due to speak on Monday, including the bank's president Mario Draghi and vice president Vitor Constâncio, and are expected to maintain a dovish stance .
While yields on most lower-rated euro zone bonds did not fall as sharply as German equivalents, there were a few stand-out performers.
Portuguese 10-year yields fell 5 bps to 2.73 percent after ratings agency DBRS confirmed the country's investment grade status on Friday, ensuring its debt remains eligible for purchase by the ECB.
Portuguese yields rose sharply last week on fears that DBRS may downgrade the country after leftist parties ousted the centre-right government, paving the way for a Socialist-led administration to end years of austerity.
Greek bonds — the highest yielding in the bloc — also held firm on Monday as Athens appears closer to reaching a deal with its creditors to unlock bailout cash.
The two sides have reached a deal on many, but not all, issues, the head of euro zone finance ministers Jeroen Dijsselbloem said on Sunday. Disbursement of the loans could come as early as Tuesday.
Greek 10-year yields were 2 bps lower at 7.31 percent in early trades.