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VIRGINIA FURNESS
Eurozone CORE bond yields remained close to the lows recorded yesterday as investors continued to turn to safe haven assets, despite a more general improvement in sentiment about the hopes of easing the Sino-US trade dispute.
The yield on 10-year German government bonds, the benchmark for the region, fell slightly to 0.348% at the start of trading, even as global stock markets turned positive on the expectation that Washington and Beijing conclude a trade agreement.
Larry Kudlow, a White House advisor, announced Wednesday the possibility of an agreement on this market, although the United States was disappointed by China's reaction. The G20 summit will begin tomorrow.
Commerzbank strategist Christoph Rieger expects German Bund yields to remain lower by the end of the year as investors seek to reduce their risk.
"It should be noted how much the Bund's support for the downward correction is rather modest, even when equities are on the rise," he said. "Many market players are eager to enter the end of the year, not too exposed to the enormous risks that come in many directions."
Yields on other high-quality euro area government bonds also declined slightly.
Investors will also be alert to signs that the US Federal Reserve may be considering a pause in rising interest rates when Fed Chairman Jerome Powell is due to speak later on Wednesday.
BUDGET ROW RUMBLES ON
In Italy, government bond yields held up well. They advanced about one basis point early in the session and held near the two-month lows reached this week as investors chose to go through another negative reversal of the budget impasse between Italy and the European Union (EU).
The 10-year Italian government bond yield was 3.3% for the last time, while its best-in-Germany spread was comfortably below 300 basis points at 296 points. basic.
European Commissioner for European Affairs Valdis Dombrovskis told the German daily Handelsblatt and Italian newspaper La Stampa that a "substantial correction" was needed in Italy's draft budget for 2019.
"The Dombrovskis news highlights how the deficit procedure (the EU and the Italian government) is different," Rieger said. "But BTP spreads have become somewhat insensitive to certain risks now."
The representatives of the governments of the EU countries are ready today to support the disciplinary procedure initiated by the European Commission against Italy under its expansionary budget.
Deputy Prime Minister Matteo Salvini said Tuesday that he wanted to avoid the EU's disciplinary sanctions against Italy's 2019 budget.
– Nampa-Reuters
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