Bond yields tumble to yet more all-time lows

Bond yields tumble to yet more all-time lows

Threats to the eurozone economy from a second wave of the coronavirus and expectations of stimulus from the European Central Bank continued to support government paper on Wednesday.

Anticipated support from the ECB has particularly benefited debt from lower-rated, Southern European countries, which offer a yield pick-up on the likes of Germany and would benefit the most from the stimulus.

The benchmark 10-year Greek bond yield fell to another all-time low of 0.764 percentage points on Wednesday.

“Italy, Greece, Portugal, they all stand to benefit a lot from ECB purchases and EU fiscal support when it materializes,” said Antoine Bouvet, senior rates strategist at ING.

But analysts are mindful of potential risks to Southern European debt as uncertainty remains around the ratification of the European Union’s 750 billion-euro recovery fund.

“The market seems poised to look through adverse EU headlines, which may pick up ahead of tomorrow’s summit,” Commerzbank’s head of rates and credit research Christoph Rieger told clients.

“The haggling and implementation risks look set to prevail for a while.” [Reuters]

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