As a new week unfolds, Euro zone government bond yields remain resilient, setting the stage for a series of key events. Investor focus is fixed on the European Central Bank’s (ECB) imminent interest rate decision, coupled with the release of U.S. employment figures later in the week.
Germany’s benchmark 10-year bond yield, a gauge for the Euro area, showed minimal change from Friday’s close at 2.409%, after a marginal increase of 5 basis points (bps) during the preceding week. The ECB is widely anticipated to maintain the current record-high interest rate of 4%. Investors eagerly await signals from President Christine Lagarde regarding potential shifts in borrowing costs and will scrutinize updated economic projections for further insights.
The week’s intrigue deepens with the unveiling of China’s National People’s Congress, where officials are poised to announce the economic growth target for the year. Simultaneously, Super Tuesday, a pivotal day in the U.S. presidential primary calendar, is expected to solidify Donald Trump’s grasp on the Republican nomination.
Wednesday brings Britain’s finance minister unveiling spending and taxation plans, navigating to appease bond markets. Concurrently, Fed Chair Jerome Powell embarks on his semi-annual two-day testimony before Congress.
Meanwhile, Italy’s 10-year bond yield experiences a slight dip of 2 bps at 3.863%. The closely monitored spread between Italy and Germany’s 10-year bonds, trading at 143 bps, shows a modest increase from last week’s two-year low of 139 bps.
Throughout the year, rising yields have been observed as traders recalibrated expectations for substantial and rapid rate cuts, given stronger-than-expected economic performance and inflation. Analysts, however, caution of a “persistent” recession in Germany, even as investor morale in the euro zone shows improvement for the fifth consecutive month in March, as indicated by recent data.
