Euro-Area Yields Touch New Lows as Investors Seek Stimulus Clues

  • ECB President Mario Draghi set to speak later Monday
  • Germany's two-year note yield matches record-low level

Austrian and Irish two-year note yields slipped to record lows as investors awaited a speech by Mario Draghi for more signals on the European Central Bank’s policy response to plunging oil prices.

Germany’s two-year yield matched the lowest on record Monday after ECB President Draghi said last week the central bank may need to bolster its already unprecedented stimulus as soon as March. He is set to speak in Frankfurt later Monday.

Consumer-price data due on Jan. 29 are set to provide the first major clue of 2016 on whether the ECB will decide the euro-area economy needs more stimulus. It will show annual inflation accelerated to 0.4 percent this month from 0.2 percent in December, according to a Bloomberg survey of analysts. That’s still a fraction of the central bank’s goal of just under 2 percent.

“There are expectations that the ECB will act to support inflation expectations,” said Luca Cazzulani, a senior fixed-income strategist at UniCredit SpA in Milan. “A key thing for euro-zone bonds will be oil prices first and the preliminary inflation release.”

Germany’s two-year note yield was little changed at minus 0.446 percent as of 4:20 p.m. London time, after matching its all-time low of minus 0.454 percent, reached on Dec. 3. The price of the zero percent security due in December 2017 was 100.845 percent of face value. The nation’s benchmark 10-year bund yielded 0.47 percent.

Austria’s two-year note yield touched minus 0.407 percent, the lowest since Bloomberg began collecting the data in 1999, while Ireland’s reached minus 0.323 percent.

Oil Tumbles

West Texas Intermediate oil futures dropped below $30 per barrel for the first time since 2003 this month amid a slump in commodities prices that helped send stocks down around the world. While that’s bolstered demand for fixed-income securities as a haven, it has sparked fresh concern about waning price growth weighing on the recovery in the 19-member euro region.

Draghi sparked a rally in euro-area sovereign bonds when he said on Jan. 21 that the central bank may reconsider its policy stance at its March meeting. The challenge to reassure markets and investors remains, though, with the Ifo institute’s business-climate index in Germany falling for a second month in January, according to a report published Monday.

The yield on Italian 10-year bonds was little changed at 1.57 percent, while that on similar-maturity Spanish debt fell one basis point to 1.72 percent.

WTI crude futures contracts for March delivery dropped as much as 4.6 percent to $30.71 a barrel on the New York Mercantile Exchange Monday.

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