Euro zone bond yields fall on Brexit uncertainty, weak consumer confidence
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
(Adds details, clarification on move in Swiss yields)
By Olga Cotaga and Yoruk Bahceli
LONDON, Oct 23 (Reuters) - Euro zone government bond yields
fell on Wednesday as investors grew more wary about how and when
Britain will leave the European Union.
British lawmakers signalled their support for the Brexit
deal British Prime Minister Boris Johnson agreed with the
European Union last week but defeated him on his timetable to
rush the legislation through the House of Commons in just three
days, making ratification of his deal by the Oct. 31 deadline
Talk of an early general election to break the impasse and
of a possible Brexit extension dominated Wednesday.
European Council President Donald Tusk said on Tuesday that
he would recommend the 27 other EU member states approve a delay
until next year. But a French diplomatic source said France was
ready to grant only a few days.
German 10-year Bund yields fell 3 basis points to -0.40%
"There is a lot of noise and uncertainty for the time
being," said Rainer Guntermann, rates strategist at Commerzbank.
Meanwhile, a flash estimate showed euro zone consumer morale
decreased to -7.6 this month from -6.5 in September, worse than
a -6.7 expectation in a Reuters poll of economists.
Swiss government bond yields also fell, with the 10-year
yield around -0.61%.
Refinitiv data showed the Swiss 10-year bond yield dropped
by 10 bps on Wednesday. But analysts said other platforms only
showed the bond yield around 2 bps lower, in line with the
broader move lower in European yields.
UBS strategist Lefteris Farmakis said such discrepancies can
occur because generic benchmarks such as those used by Refinitiv
can show larger moves in yields than those of individual bonds.
Italian government bonds underperformed after a rally on
Tuesday that marked their best day in October, with the 10-year
yield up 2 basis points at 1.05%.
Italy can lower its 2.3 trillion euro public debt only
gradually, the economy minister said, after the EU Commission
asked for details on Rome's debt reduction path.
The budget situation is a "very different situation from
where we were last year and last year they managed to get a
deal, so this year it's going to be a lot easier," said UBS
strategist Lefteris Farmakis.
"The other thing to keep in mind is the outgoing commission
is out in eight days time, so it's up to the new commission to
send new signals on how they want to negotiate."
Italy raised 6.75 billion euros ($7.5 billion) with its
latest inflation-linked bond. That too may have
pushed yields higher as investors made room for new supply.
Elsewhere, the European Central Bank is due to meet on
Thursday, but most analysts agree that the meeting should be a
non-event, given that the central bank's planned monetary policy
stimulus is due to start on Nov. 1. It will, however, be Mario
Draghi's last meeting at the helm of the ECB.
(Reporting by Olga Cotaga
Editing by William Maclean and Kirsten Donovan)
First Published: 2019-10-23 09:46:15
Updated 2019-10-23 18:34:43
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