Euro zone bond yields dip as focus turns to ECB minutes | Reuters

Euro zone bond yields dipped on Thursday amid uncertainty over the bloc’s COVID-19 vaccination programme, and as the market’s focus turned to the minutes of the ECB’s most recent meeting.

After European and British regulators found a potential link between AstraZeneca’s COVID-19 vaccine and rare brain blood clots, Spain said it would only give the shot to those over 60 and Italy made the same recommendation.

The setback for the vaccine, a key component of the bloc’s inoculation efforts, comes as the euro area grapples with a new wave of the virus, with Spanish regions tightening lockdowns on Wednesday and Germany’s chancellor supporting a tougher lockdown.

Safe-haven euro zone bond yields dipped, with Germany’s 10-year yield, the benchmark for the bloc, down around one basis point at -0.32%.

Italian 10-year bond yields, which rose sharply ahead of a chunky bond sale this week, were down 4 basis points at 0.67%, keeping the closely watched risk premium with Bunds below the four-week high it touched at over 100 basis points on Wednesday.

Thursday’s focus is on the European Central Bank, which is expected to release minutes of its March meeting at 1130 GMT following Wednesday’s release by the U.S. Federal Reserve.

Data on Wednesday showed the ECB’s pandemic emergency bond buying fell last week, likely due to a short week given Easter holidays. But purchases in March rose by 23% compared to February after the bank decided to accelerate them to combat a rise in bond yields driven by bets that U.S. fiscal stimulus would reignite growth and inflation.

“The accounts for the March ECB meeting... could provide more background to ECB communication surrounding the decision, which did indicate some differences within the governing council,” ING analysts told clients.

Sources told Reuters at the time that hawkish policymakers were sceptical about increasing the purchases and some have seen rising nominal bond yields this year as a potentially welcome sign of economic recovery.

In the primary market, France and Spain will hold auctions on Thursday, which include debt due in 2052 and 2044 respectively, after Italy received strong demand for a 50-year syndication on Wednesday. Similar long-dated issues from other countries earlier this year sold off heavily in February, at the height of this year’s bond sell-off.

“Today’s auctions in France and Spain will be testing the market’s appetite for semi-core duration, probably limiting the near-term downside in yields,” Commerzbank head of rates and credit research Christoph Rieger told clients. (Reporting by Yoruk Bahceli; editing by John Stonestreet)

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