- Euro-area sovereign securities supported by stimulus wagers
- ECB's Praet sees risk investors lose faith in CPI projection
German 10-year bonds held a six-day advance even as a report showed that consumer confidence improved this month, a signal the reading was too weak to shift investors’ expectations of additional stimulus measures from the European Central Bank.
The yield on the securities touched a two-week low. French bonds of a similar maturity were little changed, after a rally that pushed their yield to the lowest this month in the wake of the Nov. 13 terror attacks on Paris. Bonds across the euro region are being supported as officials make it clear they are considering stepping up stimulus amid the euro area’s sluggish recovery and subdued consumer-price growth.
The ECB sees a risk that investors and consumers will lose faith in policy makers’ projections for reviving inflation, Executive Board member Peter Praet said in a Bloomberg interview in Frankfurt on Monday.
“We are still adhering to our assessment that the ECB’s asset-purchase program will be extended indefinitely and the deposit rate cut in December,” Felix Herrmann, a bond analyst at DZ Bank AG in Frankfurt, wrote in a client report published before the release of Tuesday’s report by the ZEW Center for European Economic Research in Mannheim.
The organization said its index of investor and analyst expectations, which aims to predict developments six months ahead for Europe’s biggest economy, was at 10.4 this month. That’s more than the 6 level predicted in a Bloomberg survey of economists. The reading, which followed a slump in October to a one-year low, is still less than September’s and about a third of the average for the past 12 months.
Germany’s benchmark 10-year bund yield was at 0.53 percent as of 10:30 a.m. London time, after touching 0.52 percent, the lowest level since Nov. 2. The price of the 1 percent security due in August 2025 was 104.455 percent of face value.
French 10-year yields were at 0.85 percent, after being at 0.84 percent, the lowest since Oct. 30. Similar-maturity Spanish bond yields fell one basis point to 1.79 percent.