Latest news with #euro-area
Yahoo
30-05-2025
- Business
- Yahoo
Analysis-German Bund anchor can shield euro area from excessive curve steepening
By Stefano Rebaudo (Reuters) -A global selloff in government bonds due to concerns over high debt and bond sales has not left the euro zone unscathed, but Germany's growing safe-haven status should shield the bloc from an excessive rise in long-term borrowing costs. Major bond markets from the United States to Japan and Europe have seen their bond curves steepen sharply - meaning long-term bond yields have risen faster than short-term yields - a challenging environment for issuers. Germany's 30-year bond yields have jumped around 40 basis points so far this year, in a move largely driven by the creation of a 500 billion euro ($546 billion) infrastructure fund and an easing of strict borrowing rules to help lift defence spending. Yet investors and analysts say that a sharp steepening across euro-area bond markets is likely to fade from here, as a relatively better debt trajectory for Germany and global tariff uncertainty bolsters the safe-haven appeal of Bunds. In an early indication of the trend, the gap between 2-year and 10-year German bond yields looks set to end May with its first monthly drop in over a year, sliding seven basis points (bps) to 74 bps. An increase in the curve slope can create challenges for highly indebted countries, which will face higher costs when they issue new bonds, as recent weak auction results in Japan and the United States highlight. It can also complicate the monetary policy outlook by triggering an unwanted tightening of financial conditions. But in Germany's case, the steepening pressure is easing for a few reasons. Higher bond supply is now priced in. Tariff uncertainty means the European Central Bank is likely to remain in easing mode. And, compared to its peers, German debt dynamics make it a better place to park cash in times of stress. Amundi's global fixed income investment officer Gregoire Pesques said Europe's biggest asset manager had taken profit on some curve steepening trades. "In Germany, we are short 2-year bonds, short the 30-year bond, and long the 10-year bond," he said. Pesques mentioned the possibility of a more dovish than expected ECB outlook given low energy prices and a strong euro, adding there was a lack of appetite for 30-year bonds as a repricing of expectations for more bond supply is under way. The euro is up around 9% this year against the dollar, and oil prices have fallen around 13%, helping dampen inflation. Konstantin Veit, portfolio manager at bond giant PIMCO, said he saw a plausible new range of 2.5 to 3.5% for 10-year Bund yields given German fiscal plans, assuming an ECB policy rate of 2%. Germany's 10-year Bund yield is trading around 2.5%, up around 15 bps so far this year, while its UK and U.S. peers are down eight and 15 bps respectively. Germany's yield curve is currently steeper than the United States' because the ECB has almost completed its easing cycle, while the U.S. Federal Reserve is expected to cut rates mostly in 2026, analysts said. STRONGEST LINK Debt sustainability is also on investors' minds after the U.S. suffered a sharp bond selloff in early April, with investors questioning the safe-haven status of U.S. Treasuries. Since then, ratings agency Moody's has stripped the United States of its remaining triple-A credit rating and a recent 20-year bond sale was met with tepid demand. In contrast, though German debt is also rising, Europe's biggest economy is the only G7 member with a debt-to-GDP ratio below 100%, bolstering its safe-haven credentials. Notably, when U.S. and other major bond markets sold off in April, the Bund market held firm. Ratings agency S&P argues that German fiscal stimulus, expected to bolster long-term growth, supports the country's triple-A credit rating. Consultancy Saltmarsh Economics estimates that even without any nominal GDP growth, an extra 325 billion euros of debt would push Germany's debt-to-GDP ratio up to 70%, from current levels around 63%. And an extra 750 billion euros of debt would increase it to a still very low 80%. "Germany is unique in its fiscal conditions and has room to do more, but other (European) countries will have to compensate for higher defence spending in their budget," said PIMCO's Veit. We don't think European fiscal policy will be very expansionary in the next couple of years," he added. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Post
28-05-2025
- Business
- Business Post
Digital Business Ireland call for AI allowance
The government is being urged to introduce an Accelerated Capital Allowance (ACA)... Inflation expectations of euro-area consumers increased for a second month in April,... UniCredit SpA has raised its holding in the Greek ba2805 LIVE ALnk Alpha Services... RTÉ Director General Kevin Bakhurst will lead a delegation of the broadcaster's... Shein is working toward listing in Hong Kong after the online-fashion retailer did... Egis, an engineering and operations firm, has announced the completed installation... DUBLIN The Iseq All Share opened in the red on Wednesday, bucking market trends by...
Bloomberg
22-04-2025
- Business
- Bloomberg
ECB's Rehn Sees Tariffs Pushing Inflation Down in Short Term
European Central Bank Governing Council member Olli Rehn said US tariffs will push euro-area inflation down in the short term, though the overall impact will be 'modest.'
Bloomberg
17-04-2025
- Business
- Bloomberg
Denmark Cuts Rate to Match ECB as Krone Slide Tests Peg
Denmark 's central bank lowered its benchmark interest rate by a quarter point to defend its peg to the euro in a move that matched its euro-area counterpart after recent turbulence on the financial markets. Nationalbanken, which pegs the Danish currency to the euro, reduced its current account rate to 1.85% from 2.1%, according to a statement on Thursday. The decision, anticipated by analysts, marks the seventh rate cut in the current cycle and follows a reduction from the European Central Bank by the same margin earlier in the day.
Bloomberg
11-04-2025
- Business
- Bloomberg
ECB Seen Cutting Rate Twice in Policy Beholden to Trump's Whims
European Central Bank officials are likely to cut borrowing costs twice more, though they will ultimately take their cue from US President Donald Trump, according to a Bloomberg survey of economists. Respondents expect consecutive quarter-point reductions in April and June, before the deposit rate then stays at 2% at least through the end of 2026. They caution that US policy poses significant risks, threatening to undermine euro-area economic growth.
