Bonds: Yields move higher across the board on US-China trade headlines
By Alexander Bueso
Date: Thursday 12 Sep 2019
(Sharecast News) - These were the movements in some of the most widely-followed 10-year sovereign bond yields:
US: 1.77% (+3bp)
UK: 0.67% (+4bp)
Germany: -0.52% (+5bp)
France: -0.23% (+3bp)
Spain: 0.22% (-3bp)
Italy: 0.87% (-10bp)
Portugal: 0.24% (-3bp)
Greece: 1.55% (-10bp)
Japan: -0.21% (-1bp)
Government bond yields finished mostly higher - and off their lows in the Eurozone periphery - on both sides of the Atlantic after a roller-coaster session as investors reacted to the incoming headlines.
An early afternoon tweet from the US President sent yields sharply lower even as, in Frankfurt, European Central Bank chief Mario Draghi was talking at his press conference about the risks to the outlook for the euro area economy from geopolitics, trade tensions and emerging markets.
However, later reports, albeit contradictory, that some of Donald Trump's advisers were looking at the possibility of an interim trade deal with Beijing, that would pause and roll-backl some tariffs in exchange for commitments on intellectual property and agricultural purchases, appeared to send yields duly higher.
Against that backdrop, earlier the European Central Bank had announced a raft of new stimulus measures, including a cut to the deposit rate, even cheaper (and for longer) financing for euro area lenders, a tiered deposit rate and more debt purchases that would run until the central bank began raising rates.
Significantly, and in unusually blunt language, ECB chief Mario Draghi said it was "high time" that fiscal policy took over as policymakers' main tool.
Commenting on the ECB's policy decisions - which were roughly as expected - and Draghi's remarks, Claus Vistesen at Pantheon Macroeconomics said that Draghi was justified in calling for greater spending from governments, adding that he was likely to succeed, which in turn pointed towards higher economic growth and asset prices.
"Clearly, the governing council believes that it is being pushed to take increasingly extreme actions in an environment, where fiscal policymakers are sitting idle. That's fair enough [...]," Vistesen said.
Nevertheless, it was later revealed that the central bank governors from Austria, France, Estonia, Germany and the Netherlands had opposed further QE.
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