Euro Zone Bond Yields Dip as Powell Calms Markets

AMSTERDAM, Feb 24 Reuters Euro zone bond yields edged down in early Wednesday trade after sizeable rises a day earlier, with markets appearing reassured by U.S. Federal Reserve Chair Jerome Powells comment that it would take time before the Fed considered changing policy.

Prospects for more U.S. fiscal stimulus have driven reflation bets across markets, dragging up global bond yields led by U.S. Treasuries.

That trade has also hurt euro zone bonds, where the rise in yields is seen as less justified given the weaker economic outlook in the bloc.

Pushing back on suggestions that loose monetary policy risked unleashing inflation and financial risks in an emerging boom, Powell said monetary policy needs to continue remaining accommodative. He said the Fed would move carefully, patiently, and with a lot of advance warning before making changes.

In the euro area, Germanys 10year bond yield, the regions benchmark, was down about 1 basis point to 0.33 at 0840 GMT, after notching a 3 bps rise on Tuesday that brought it close to its highest since June 2020.

Southern European bond yields, which underperformed on Tuesday, were unchanged to a basis point lower, with Italys 10year yield down 1 basis point at 0.64. .

The Fed chair Mr Powell said yesterday that the economy needs plenty of support for quite some time, which was sufficient to convince the markets that the Fed is in no hurry to tighten policy even if inflation rises, Lauri Halikka, fixed income and FX strategist at…

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