Latest news with #MichielTukker
Bloomberg
3 days ago
- Business
- Bloomberg
ING Warns of Volatility in Euro Rates on Dutch Pension Overhaul
Volatility in a corner of the European rates markets is on the rise, offering a glimpse into the potential impact of a major overhaul of the Dutch pension system in the coming months. A gauge of expected swings in 30-year euro swaps, a type of derivative, is climbing, in contrast to a decline in shorter tenors, ING rates strategists Michiel Tukker and Benjamin Schroeder wrote in a note on Friday. The volatility counters a general recent decline in swings across most markets in recent weeks.
Mint
6 days ago
- Business
- Mint
German 30-year government bond yields hit highest since 2011
German 30-year yields reach highest since 2011 Driven by investor focus on likely rise in fiscal spending Ukraine peace deal could also lead to increase in bond supply Aug 12 (Reuters) - German 30-year yields rose to their highest level since 2011 on Tuesday, driven by renewed investor focus on expectations of a sharp increase in fiscal spending, while U.S. economic data released earlier came in roughly in line with forecasts. Germany is about to increase its fiscal spending massively to revive economic growth and scale up military investments. "I don't see a specific driver today, but the move in long-dated German yields isn't surprising given the low volumes and the broader economic backdrop," said Michiel Tukker, rate strategist at ING, citing the Dutch pension reform and expectations of increased issuance from Germany. Germany's 30-year government bond yield was up 7 basis points (bps) at 3.30%, after hitting 3.31%, its highest level since 2011. The Dutch pension system is depriving the euro zone's $10 trillion government bond market of a key buyer of its long-term debt, just as state funding needs a boost. A peace deal in Ukraine could also lead to a further increase in bond supply, as Europe remains committed to supporting the country's reconstruction. Russian forces have made a sudden thrust into eastern Ukraine, a move that may be designed to increase the pressure on Kyiv to give up land as the U.S. and Russian presidents prepare to meet. Ukrainian President Volodymyr Zelenskiy said that an unjust peace would not last long. U.S. long-dated bonds also underperformed with 30-year yields up 4.5 bps to 4.88%. Euro zone borrowing costs had held steady for most of the session after the United States and China rolled over a trade truce for 90 more days, as expected. Policy-sensitive German two-year yields were last up 0.5 bps at 1.97%, while German 10-year yields rose 5 bps to 2.74%. Two-year U.S. Treasury yields fell after data showed that U.S. consumer price inflation was roughly in line with the expectations of economists in July, likely clearing the way for the Federal Reserve to cut interest rates in September. U.S. consumer prices increased moderately in July, though underlying inflation posted its largest gain in six months. "Goods that rely heavily on imports are facing pronounced upward price pressure," said Katy Stoves, investment manager at Mattioli Woods. "However, inflation from services, not subject to tariffs and by far the bigger contributor to the U.S. economy, may help prevent overall U.S. inflation increases," she added. Italy's 10-year government bond yields rose 5 bps to 3.56%, leaving the yield gap with safe-haven Bunds at 81 bps, its lowest level in over 15 years.
Business Recorder
18-06-2025
- Business
- Business Recorder
Euro zone bond yields steady before Fed, traders await new catalysts
LONDON: Euro zone bond yields held steady on Wednesday with traders awaiting the outcome of the Federal Reserve meeting later in the day for any hints about further rate cuts, and keeping a wary eye on developments in the Middle East. Germany's 10-year bond yield was down 1 basis point on the day at 2.52%, and its two-year yield was flat at 1.86%. Both were largely in the middle of their recent ranges. The big event for markets around the world on Wednesday is the Fed's rate decision, though the U.S. central bank is widely expected to leave its benchmark overnight interest rate in the 4.25%-4.50% range, where it has been since December. Traders' focus will be on whether it gives any clues as to whether and when it might begin cutting rates again, though it is also likely to repeat that it can't give much guidance until the impact of U.S. President Donald Trump's import tariffs and fiscal policies become clearer. Even an unlikely change in Fed messaging may do little to nudge European government bonds out of their recent rangebound trading, ING analysts said, as the economic effect of tariffs - inflationary in the U.S., disinflationary in Europe - means Fed and ECB policy is becoming more divergent. Markets are currently pricing one final 25 basis point ECB rate cut this cycle to take its terminal rate to 1.75%, expectations that have been fairly steady in recent weeks, contributing to rangebound trading in government bonds. Euro zone bond yields dip, traders eye Middle East tensions Michiel Tukker, senior rates strategist at ING, said there are two things that could change that. 'First is trade. July 9 is the date where we possibly have trade tariffs kick in if there isn't a trade deal. That'll start becoming a hot topic in the weeks before, and that's the period we're rolling into,' he said. 'Either negotiations turn sour, we go back to 1.5% (terminal rate), or things go quite well and he (Trump) softens his narrative and we maybe go closer to 2%, or at least stay near 1.75%, and the focus will shift back to German fiscal spending.' Germany is embarking on a massive ramp up of borrowing to fund increased spending on infrastructure and defence, likely leading to higher yields in the long term. The other factor in the near term, Tukker said, was economic data, though it would require multiple data points to detect a clear trend given the recent volatile trade policy - 'each data point can tell a different story depending on the sample month.' Investors will also be looking at Wednesday's releases of U.S. Treasury International Capital data that show overseas ownership of Treasuries. There was much speculation earlier this month that foreign investors were looking to reduce their ownership of U.S. government bonds due to erratic U.S. policy. Again, however, one data point will not be enough to provide a clear picture. Other bonds in Europe were largely moving in line with Germany's. Italy's 10-year bond yield, the benchmark for the euro zone periphery was flat at 3.51%.
Mint
30-05-2025
- Business
- Mint
Euro zone benchmark German 10-year bond yields hits three-week low to 2.4% amid Trump tariffs-led impact
Euro zone benchmark German bond yields were on track on Friday for their biggest weekly decline since mid-April as investors focused on the long-term adverse economic impact of U.S. trade policy. Germany's 10-year government bond yield was set for a 5-basis-point weekly drop, particularly after falling on Thursday on risks of extended policy and economic paralysis. On Friday, by 1457 GMT, it was up 1 bp to 2.52% after hitting a three-week low at 2.497% in earlier trade. A U.S. appeals court reinstated U.S. President Donald Trump's tariffs on Thursday, leaving Wall Street with no clear direction a day after most of the tariffs were blocked by a trade court. Markets were largely unmoved by German inflation data showing price growth easing further in May closer to the European Central Bank's 2% target, though it was higher than analysts expected. And euro zone bank lending continued to rebound last month, likely reflecting lower interest rates, separate data showed on Friday. Focus was also on data showing U.S. consumer spending increasing marginally in April while the Fed's favoured measure of underlying price pressures posted its smallest annual increase in four years. "U.S. data may play a more instrumental role for euro rates than domestic data, given that a hit to global risk sentiment can bull flatten the euro curve," said Michiel Tukker, senior European rates strategist at ING. "Yet with 10-year Bunds trading around the level of swaps, markets are already positioned for more headwinds and uncertainty ahead," he added. The gap between interest rate swaps and Bund yields was at minus 2.4 bps on Friday. It hit its all-time low at around -16 bps in early March. It was around 25 bps in October 2024, before a German political crisis. Markets price in more than a 90% chance of a 25 bps ECB rate cut next week. They also indicated a deposit facility rate at 1.70% in December, implying two rate cuts and just under a 20% chance of a third easing move by then. The ECB will almost certainly cut interest rates on June 5, with a more than 70% majority of economists polled by Reuters expecting policymakers to pause for the first time in a year in July despite a weak economy at risk from the U.S.-led trade war. Italy's 10-year yield was last up 2 bps to 3.52%, after dropping to 3.488%, its lowest level in nearly 3 months. It was on track for a weekly drop of 11 bps, the most since mid-April. The gap between Italian and German yields was at 97 bps after reaching 89.8 bps on Thursday, its lowest since February 2021.
