Germany’s Bonds Halt Gains as Investors Prepare for BOJ, Fed

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  • Ten-year yields earlier touched lowest in almost two weeks
  • Investors await signals on central-bank stimulus after Brexit

German 10-year bonds halted a three-day gain as investors waited for the latest announcements on monetary policy from the Federal Reserve and the Bank of Japan this week.

Yields on Europe’s benchmark 10-year sovereign securities fell earlier to the lowest in almost two weeks. The bonds swung between gains and losses as investors prepared for signals on the magnitude of any central-bank stimulus after the U.K. voted last month to leave the European Union, heightening concerns of a slowdown in global growth. Britain’s economy is the world’s fifth-largest, while the EU is the biggest trading bloc.

Euro-area bonds have been supported by speculation the European Central Bank will extend its quantitative-easing program in September, after it kept policy unchanged at a meeting last week. The central bank accelerated the pace of its asset purchases in the week ended July 22, according to figures released Monday.

The ECB “showed little sign of slowdown in the pace of its PSPP,” said Martin van Vliet, senior interest-rate strategist at ING Groep NV in Amsterdam, referring to the central bank’s Public Sector Purchase Programme. “Actual buying flows and expectations of an extension of QE in the wake of the Brexit vote” by a number of central banks are helping keep core bonds well supported, he said.

Germany’s 10-year bund yield was little changed at minus 0.027 percent as of 4:28 p.m. London time, having earlier dropped to minus 0.063 percent, the lowest since July 14. The price of the zero percent security due in August 2026 was 100.27 percent of face value. The three days of gains through Monday represented the longest winning run since June 16.

While economists in a Bloomberg survey forecast the Federal Reserve will keep U.S. interest rates on hold Wednesday, analysts in a separate survey predict the Bank of Japan will ease monetary policy on July 29.