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After U.S. Data, Euro Zone Rates Continue To Rise As Attention Returns To The Economy

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Student Loan Forgiveness; Source- MARCA

Tuesday saw a rise in euro zone bond yields as investors shifted their allocation away from assets perceived as safe havens and towards growth, inflation, and central bank policy.

Retail Sales Increased In US

A subsequent bond sell-off occurred on both sides of the Atlantic, with Treasury 10-year rates rising 10.5 basis points (bps) to 4.81% as a result of U.S. retail sales data that exceeded expectations.

After increasing 5 bps on Monday, Germany’s 10-year yield was up 7 bps at 2.85% as of right now. Bond prices decline when yields rise, and vice versa.

Prices for Italian bonds increased even higher, and the yield on the 10-year bond increased by 11 basis points to 4.87%.

Because U.S. yields have been climbing for the past few days, yields are generally rising as well. That’s helping us along,” remarked RBC Capital Markets’ head of interest rate strategy, Peter Schaffrik.

The bond market is being affected by a lacklustre demand for sales of government debt, according to Commerzbank’s head of rates and credit research, Christoph Rieger.

Days after there was little interest in a 30-year U.S. bond sale, there was a lacklustre reaction to an auction of 20-year Japanese notes. However, when Germany offered to sell 4 billion euros ($4.2 billion) in shorter-dated notes on Tuesday, it attracted aggressive bids.

Policy Rate Goes Up To 4%

According to German survey data, investor sentiment improved in October more than anticipated, indicating that respondents anticipate better growth over the next six months.

US Data

Source- Forbes

In an interview that was released on Monday, Philip Lane, the top economist at the European Central Bank (ECB), stated that there was still “quite some distance” to go before rate reductions were considered. Next week, the ECB will determine interest rates. In September, it raised its main policy rate to 4%.

Germany’s 2-year bond yield increased 5 basis points to 3.20%, reflecting its sensitivity to predictions regarding ECB interest rates.

The difference in 10-year bond yields between Italy and Germany increased to 200 basis points as a result of the increase in Italian yields.

This month, the spread reached its biggest level since January at 209 basis points. The spread is interpreted as an indicator of market attitude towards the more indebted countries in the euro zone.

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