German yields near record low on ECB rate cut bets

Wednesday, 24. July 2019 12:34

Prices of the least risky sovereign bonds jumped on Wednesday, which means yields dropped substantially, with further deterioration in the manufacturing sector in the Eurozone. According to results of IHS Markit's survey, the segment suffered the worst drop in six and a half years in June. The shift could mark the materialization of downward risks highlighted by officials from the European Central Bank and prompt them to lower the interest rate for deposits sooner or deeper. The gauge has been a record low 0.4% under zero since March 2016 and the German benchmark yield has been threatening to dip further.

The euro fell as investors flocked to safer assets including the yen and precious metals as the ECB's expected policy easing may push the Federal Reserve and the Bank of Japan to a race lower. Deutsche Bank's stunning quarterly loss didn't help sentiment even though interest rate cuts make stocks more appealing. Including inflation, Germany's debt has had negative yields past the 20-year maturities in the curve. British gilts were looking for direction and United States counterparts gained.

The two-year rate was little changed at 12:29 pm CET at 0.777% below zero. The 10-year benchmark dropped 1.6 basis points to minus 0.366% after touching a negative 0.383%. The 30-year yield dropped two points to 0.222% and equivalent futures were flat and up by 0.18% and 0.59%, respectively.

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