German Bonds Halt Two-Day Advance as BOJ Disappoints on Stimulus

  • Bunds are still set for second straight weekly rally
  • Reports show faster euro-zone inflation and slowing growth

German 10-year bonds halted a two-day advance after the Bank of Japan kept its key monetary tools unchanged, in a decision that disappointed investors who predicted a bigger increase in stimulus from the Asian nation.

The euro zone’s benchmark government securities were still set for a second weekly gain, even as data showed regional inflation unexpectedly quickened in July, one of the first signs of Brexit’s impact on the economy. A separate report showed economic growth slowed in line with analysts’ projections in the second quarter.

German bunds were little changed, erasing an earlier drop as U.S. Treasuries rose on worse-than-predicted economic data. Earlier in the day, they’d followed their U.S. and Japanese peers lower as the BOJ expanded its purchases of exchange-traded equity funds, while refraining from making a deeper cut to its negative interest rate or boosting the amount of government debt it buys. There was speculation this may reflect the plans of the European Central Bank.

“It seems that the BOJ is near the monetary boundaries,” said Birgit Figge, a fixed-income strategist at DZ Bank AG in Frankfurt. “Market participants transfer this to the ECB, too -- the expectation that monetary policy can’t be eased and eased.”

Yields on Germany’s 10-year bund were little changed at minus 0.09 percent as of 2:17 p.m. London time. The price of the zero percent security due in August 2026 was at 100.949 percent of face value.

The yield is down six basis points since last Friday.

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