Eurozone bonds balance risk sentiment, Fed

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September 20 (Reuters) – Eurozone bond yields trended Monday at the start of a busy week, as risk sentiment weakened and investors braced for results of US Federal Reserve meeting Wednesday.

The Fed is still expected to lay the groundwork for a slowdown in bond buying at its policy meeting on Tuesday and Wednesday, although consensus is for an announcement on this later in the year.

Risk sentiment has weakened in global markets as falling commodity prices hit European equities and fears grow around indebted Chinese real estate developer Evergrande which spills over into China’s real estate sector ahead of the payment of payments. company bonds due Thursday.

The German 10-year yield, the benchmark for the eurozone, was down more than a basis point to -0.295% at 07:16 GMT.

It held steady below the 10-week high reached on Friday after a report suggested the European Central Bank expects to hit its inflation target by 2025.

Other euro area 10-year bond yields were between two basis points higher and two basis points lower.

“Bunds remain vulnerable ahead of the crucial Fed meeting with likely clear signals that cut is imminent and the risk of points shifting as fragile risk sentiment provides support,” said Rainer Guntermann, rate strategist at Commerzbank in Frankfurt.

“The ECB’s inflation outlook is another factor and could continue to weigh on Bunds given continued upward pressure on breakevens and real yields no longer falling.”

Following Friday’s liquidation, the focus will once again be on the European Central Bank on Monday, with board member Isabel Schnabel due to deliver a speech at 11:35 GMT.

Portuguese and Greek bonds reacted little to rating upgrades from Moody’s and DBRS respectively.

The uncertainty ahead of an election in Germany, where the Social Democrats are leading opinion polls that point to a very fragmented outcome, also keeps the bloc’s debt investors on their toes.

(Edited by Timothy Heritage)


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