Euro Zone Peripherys Yields Fall to Record Lows

MILAN, Dec 10 Reuters Yields on peripheral euro zone government bonds fell to record lows before a European Central Bank meeting that is expected to provide more emergency bond buying and cheap liquidity for banks.

Economists see the ECB expanding the Pandemic Emergency Purchase Programme PEPP by another 500 billion euros and extending it at least to the end of 2021, while providing more generous Targeted LongTerm Refinancing Operations TLTROs.

Downgrades to economic growth and inflation forecasts are also expected.

The duration of the PEPP extension and TLTRO details could make the difference, Commerzbank said.

Germanys 10year bond yield was down 1 basis point, after reaching its lowest since Nov. 9 at 0.618.

A PEPP expansion of 650 billion euros billion would provide a credible yield curve control backstop even if it is not fully used in the end and push peripheral spreads tighter, Citi said in a research note.

Italian 10year government bond yields fell to record lows at 0.53, down 1 bp. Spanish and Portuguese 10year yields reached record lows at 0.013 and 0.022 respectively.

Uncertainty about Brexit negotiations and a U.S. stimulus package continued to weigh on risk sentiment.

The U.S. House of Representatives on Wednesday approved a oneweek extension of federal government funding, giving lawmakers more time to haggle over a broader spending package.

British Prime Minister Boris Johnson and Ursula von der Leyen, the president of the European Commision, gave…

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