European Bonds Stabilize as Amundi Says Case for Stimulus Intact

  • German 10-year bunds halt longest losing run since July
  • Portugal’s securities reverse drop after nation sells debt

Government bond markets across the euro-area showed signs of stabilizing as investors judged the recent selloff didn’t herald the start of a rout, with economic data underpinning the case for more stimulus from Tokyo to Frankfurt.

Germany’s benchmark 10-year bunds halted a four-day drop before a report due Thursday that economists said will confirm that the region’s inflation rate failed to accelerate last month, staying near zero. That’s fueling speculation that the European Central Bank isn’t done with stimulus, even after President Mario Draghi last week failed to signal an extension of a quantitative-easing program that’s due to end in March. The ECB’s inaction sparked a selloff across the world, pushing a measure of sovereign-bond yields to the highest in almost three months.

“The fundamentals haven’t really changed, which is economic growth is OK but not strong enough, inflation is not strong enough, so there is a need still in Europe and Japan for more stimulus and easy monetary policy,” Myles Bradshaw, London-based head of aggregate strategies at Amundi, said in an interview with Nejra Cehic and Manus Cranny on Bloomberg Radio. “At the moment it’s a correction. What triggered it was on Thursday the ECB not meeting expectations that they would extend QE beyond March.”

Yields Slide

German 10-year bund yields fell four basis points, or 0.04 percentage point, to 0.028 percent as of 4:09 p.m. in London. The zero percent security due in August 2026 rose 0.426, or 4.26 euros per 1,000-euro ($1,126) face amount, to 99.721. The yield climbed earlier to its highest since June 24, the day the decision on Britain’s vote to leave the European Union was announced.

Spain’s 10-year bond yield dropped three basis points to 1.07 percent, while that on similar-maturity Italian debt slid three basis points to 1.29 percent.

Portugal’s bonds reversed an earlier decline as the nation sold 750 million euros total of debt maturing in October 2023 and April 2037. The country’s 10-year bond yield fell three basis points to 3.27 percent, after rising to 3.35 percent, the highest since June 27.

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