Euro zone bond yields drop as COVID variant sows fear By Reuters

© Reuters. FILE PHOTO: The phrase “COVID-19” is mirrored in a drop on a syringe needle on this illustration taken November 9, 2020. REUTERS/Dado Ruvic/Illustration

By Abhinav Ramnarayan and Dhara Ranasinghe

LONDON (Reuters) -Euro zone authorities bond yields dropped sharply throughout the board on Friday as buyers reacted to a newly recognized coronavirus variant spreading in South Africa by piling into protected haven property.

The variant was thought-about by scientists to be essentially the most important but discovered, Britain stated on Friday, including that authorities wanted to determine whether or not or not it rendered vaccines ineffective.

“It is a classical risk-off transfer into protected havens equivalent to authorities bonds, with equities and different dangerous property beneath stress,” stated Commerzbank (DE:) charges strategist Rainer Guntermann.

“It’s nonetheless early days, however going into year-end, buyers might choose to maintain a bit extra in protected havens and we additionally must assess the way it feeds into central financial institution danger assessments even when this variant seems to not be of giant concern,” he stated.

“It is a reminder that the pandemic might pop up once more at nearly any time.”

Protected havens, equivalent to authorities bonds, the Japanese yen, the Swiss franc and gold have been in demand, whereas Asian and European fairness markets recorded losses.

Germany’s 10-year authorities bond yield, the benchmark for the bloc, was down 9 bps at -0.33% at 1530 GMT. Different extremely rated euro zone authorities bond yields have been decrease by round eight bps.

Italy’s 10-year authorities bond yield dipped under the 1% mark and was at 0.97%, down 9 bps on the day.

US Treasury yields slipped round 7-10 bps throughout the curve.

In the meantime, rate-hike expectations within the single foreign money bloc fell, with money-market buyers pricing in a roughly 50% probability of a 10 foundation level price hike from the European Central Financial institution in December 2022, having totally priced in such a transfer earlier this week.

ECB policymakers Ignazio Visco and Luis de Guindos stated on Friday the euro zone financial system was nonetheless rebounding however the pandemic was as soon as once more a supply of fear.

The central financial institution continues to be on target to finish its Pandemic Emergency Buy Program in March, ECB vice-president de Guindos stated.

ECB President Christine Lagarde was quoted as saying to a German each day that the central financial institution anticipated inflation to fall from January.

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