The Eurozone bond yields edged lower on Monday as investors anticipate the inflation data later this week. This comes while U.S. Treasury yields are rising due to expectations of an economic recovery and a potential rise in inflationary pressure from increased government spending and stimulus packages.
The German 10-year Bund yield fell by 0,3 basis points to -0,37%, while the French equivalent dropped by 1 basis point to -0,14%. The Italian 10-year BTP yield also declined slightly but remained close to its highest level since early March at 0,83%.
Analysts suggest that investors are waiting for more clarity on how much higher consumer prices could go before deciding whether or not they should buy bonds with longer maturities as a hedge against inflation risks over the long term. Inflation is expected to remain low in 2021 due to weak demand caused by Covid-19 restrictions but could pick up sharply if governments continue their expansive fiscal policies into 2022 and beyond.
Meanwhile, analysts believe that the European Central Bank will maintain its current monetary policy stance until it can be sure that any increase in prices is sustainable over time rather than being driven solely by temporary factors such as energy costs or supply chain disruptions related to pandemic lockdowns.
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