German 10-year yield dips to record low after ECB

Thursday, 25. July 2019 14:19

Sovereign debt bonds with low risk were in demand on Thursday as the European Central Bank expressed determination to bring inflation back up to target just below 2% using all instruments at hand. Policymakers hinted at rate cuts, renewal of net asset purchases, tiering for bank deposits and a shift in forward guidance. Prices of German securities jumped on the mid- to far end of the maturity curve, leading yields lower.

The spread between 10-year Bund yields on equivalent Italian debt fell to the lowest level since May of last year. The euro weakened further and stocks rallied. Bonds issued by the United States and the United Kingdom also rose ahead of the press conference of ECB President Mario Draghi in Frankfurt.

The German two-year yield slipped slightly to 0.793% under zero at 2:19 pm CET. The 10-year rate plunged 4.1 basis points to a negative 0.414%, an all-time record. It compares to a 4.3-point dip to 0.166% for the 30-year bonds. Corresponding futures advanced 0.02%, 0.36% and a stunning 0.96%, respectively. The 10-year US Treasury yield fell 3.3 points to 2.017%.

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