Euro zone bond yields dip; focus on spending plans, ECB policy
LONDON: Germany's 10-year bond yield fell on Thursday after rising the day before, but remained within its recent narrow range as markets weighed worries about rising fiscal spending against the outlook for monetary policy.
Germany's 10-year government bond yield, the euro zone's benchmark, was last down 2 basis points at 2.54%, after rising three bps the day before. The 30-year yield was down 1.5 bps at 3.05%.
Investor focus has been on the longer-end of the curve, with expectations that euro area countries, led by Germany, will ramp up borrowing to increase spending on defence.
On Wednesday, NATO leaders agreed to boost spending on defence to 5% of GDP, but some European nations, already running large deficits and seeing debt balloon, may struggle to meet the target.
Germany, which has greater scope to increase spending, published its draft budget for 2025 earlier this week, which included record investments to boost growth.
Germany's two-year yield, which is more sensitive to changes in monetary policy expectations, was down 1.5 bps at 1.831%.
The European Central Bank lowered its deposit rate earlier this month but signalled it was done with rate cuts for now after lowering borrowing costs eight times in just over a year.
The central bank's vice president Luis de Guindos and influential rate setter Isabel Schnabel are both scheduled to deliver speeches later on Thursday.
Italy's 10-year bond yield was down 2.5 bps at 3.484%, pushing the yield gap between Italian and German 10-year bonds tighter by 1 bp to 93 bps.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
7 hours ago
- Business Recorder
German parliament passes 46-bln-euro corporate tax relief package
BERLIN: German lawmakers on Thursday passed a multi-billion-euro package of fiscal relief measures to support companies and boost investment, part of the new government's plans to put Europe's largest economy back on track for growth after two years of decline. The package, dubbed by the government as an 'investment booster', contains corporate tax breaks amounting to almost 46 billion euros ($54 billion) from this year through to 2029, creating a gap in state coffers that prompted pushback from state governments. The bill was passed in the Bundestag lower house with support from the conservatives and Social Democrats, which make up the coalition government. The measures seek to reduce companies' tax bills with favourable depreciation options for investments of up to 30% and for electric car purchases of as much as 75%. Germany's Merz says Iran must immediately enter talks with US and Israel The package also promises a one-percentage-point cut to the corporate tax rate each year over five years from 2028, bringing it down to 10% by 2032. The package still has to be passed by the Bundesrat upper house, expected on July 11. In order to win the support of the federal states, whose support is key in the upper house, the government has pledged to cover a large part of the resulting losses in tax revenue.
Business Recorder
7 hours ago
- Business Recorder
European shares edge higher as Israel-Iran ceasefire holds; Fed independence in focus
European shares edged higher on Thursday, aided by signs that the Israel-Iran ceasefire appeared to be holding, while investors braced for the July 9 deadline for trade deals with the United States. The pan-European STOXX 600 index was up 0.2% at 538.27 points, as of 0839 GMT. Other regional indexes traded higher. Investors have been soothed by a ceasefire between Israel-Iran. U.S. President Donald Trump said on Wednesday he would likely seek a commitment from Iran to end its nuclear ambitions at talks next week. Attention has now shifted to the upcoming July 9 U.S. tariff pause deadline. With limited progress on trade deals, except for a U.S.-UK agreement, the European Union is scrambling to secure its own deals with Washington. On Thursday, EU leaders are expected to tell the European Commission whether they prefer a quick trade deal with the U.S., even if it means conceding better terms to Washington, or to escalate the dispute in hopes of securing a more favourable outcome. 'We haven't heard much about a deal between U.S. and Europe and as we approach closer to the tariff deadline, it's becoming more of a risk factor for Europe,' said Anthi Tsouvali, multi-asset strategist at UBS Global Wealth Management. The bloc is already facing tariffs including 50% on steel and aluminium and 25% for cars and car parts. Trump has threatened that tariffs could rise to 50% without an agreement. Meanwhile, Trump on Wednesday called Federal Reserve Chair Jerome Powell 'terrible' and said he has three or four people in mind as contenders for the top job. The Wall Street Journal reported that Trump may replace Powell as early as September or October. Among sectors, European defence rose 1.3%. NATO leaders on Wednesday backed the big increase in defence spending that Trump had demanded. Rheinmetall and Hensoldt jumped 3% and 2.8%, respectively. Saab rose 3.2%, while QinetiQ was up nearly 4%. Industrial miners led sectoral gains, rising 1.5%. H&M gained 5.6% after the Swedish fashion retailer reported a slightly stronger second-quarter profit. Inchcape rose 6% and was among the top percentage gainers in the STOXX 600, after the British car distributor reiterated its full-year financial outlook. Edenred advanced 5.1% after a French minister updated on the proposed meal voucher reform. EQT gained 5.1% after Citigroup upgraded the Swedish private equity firm to 'buy' from 'neutral'. On the data front, German consumer sentiment is set to edge lower heading into July as households' increased willingness to save counteracts improving income prospects.
Business Recorder
10 hours ago
- Business Recorder
Euro zone bond yields dip; focus on spending plans, ECB policy
LONDON: Germany's 10-year bond yield fell on Thursday after rising the day before, but remained within its recent narrow range as markets weighed worries about rising fiscal spending against the outlook for monetary policy. Germany's 10-year government bond yield, the euro zone's benchmark, was last down 2 basis points at 2.54%, after rising three bps the day before. The 30-year yield was down 1.5 bps at 3.05%. Investor focus has been on the longer-end of the curve, with expectations that euro area countries, led by Germany, will ramp up borrowing to increase spending on defence. On Wednesday, NATO leaders agreed to boost spending on defence to 5% of GDP, but some European nations, already running large deficits and seeing debt balloon, may struggle to meet the target. Germany, which has greater scope to increase spending, published its draft budget for 2025 earlier this week, which included record investments to boost growth. Germany's two-year yield, which is more sensitive to changes in monetary policy expectations, was down 1.5 bps at 1.831%. The European Central Bank lowered its deposit rate earlier this month but signalled it was done with rate cuts for now after lowering borrowing costs eight times in just over a year. The central bank's vice president Luis de Guindos and influential rate setter Isabel Schnabel are both scheduled to deliver speeches later on Thursday. Italy's 10-year bond yield was down 2.5 bps at 3.484%, pushing the yield gap between Italian and German 10-year bonds tighter by 1 bp to 93 bps.
