Eurozone yields near three-month highs as oil prices skyrocket

Band Abhinav Ramnarayan

LONDON, October 5 (Reuters)Eurozone government bond yields hovered near recent highs on Tuesday as oil prices hit a three-year high, sparking inflation concerns and a potential tightening of monetary policy in major central banks of the world.

OPEC + said on Monday it would stick to an existing pact for a gradual increase in oil production, sending crude prices soaring and adding to inflationary pressures that consuming countries say will derail an economic recovery after the pandemic.

Government bonds are normally seen as a safe haven for investors in difficult times, but inflation has been a major concern for investors as they attempt to position themselves for the removal of unprecedented stimulus measures. of the central bank.

“The surge in energy prices has raised new fears of accelerating inflation even more than current forecasts suggest, with repercussions for central banks and the extent of monetary stimulus we can afford. expect us over the next few months, ”said Jim Reid, Deutsche Bank strategist. noted.

Stock markets around the world have also been hit by rising energy prices and concerns about potential defaults by Chinese real estate groups, but Reid said government bonds cannot be a big safe haven. if the sale is partly linked to inflation.

Eurozone government bond yields held Tuesday near the three-month highs reached last week.

The yield on German 10-year government bonds DE10YT = RR, the benchmark for the region, was slightly higher at -0.214%. This is 30 basis points more than two months ago.

Other European government bond yields held steady at a bit higher, with 10-year gilt yields GB10YT = RR nearing a two-year high, as supply constraints induced by Brexit add to inflationary pressures in Britain.

At 08:00 GMT, Markit’s Purchasing Managers Index (PMI), a well-followed economic survey, is expected to be released for the euro zone.

A Reuters poll suggested a reading of 56.3 for the services sector PMI and 56.1 for the composite PMI, where 50 is the line that separates the contraction from the expansion.

(Report by Abhinav Ramnarayan, edited by Ed Osmond)

((; 0044 751 745 1044; Reuters messaging: Twitter: @abhinavvr))

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