Euro zone government bond yields edged higher on Monday, with the European Central Bank expected to slow down its asset purchases after a strong start to its trillion euro programme last week.
After buying €10 billion worth in the first three days of the programme, according to ECB policymaker Benoit Coeure, it was well on track to reaching its target of buying €60 billion of mostly government debt a month.
That led to expectations of a slowdown, although whether it would come this week or later was still uncertain. Either way, investors trying to trade off any ECB moves were easing the pace as well, traders said.
The ECB will reveal how much it bought last week later on Monday.
“In the first three days of last week they were very active and then from what we’ve heard (ECB activity) diminished quite a lot,’’ said Piet Lammens, a strategist at KBC.
“There has been a lot of scepticism about the ability of the ECB to buy in the market ... so probably they wanted to show that they have enough sellers out there. Maybe now they say ‘we have made our point and we would go more softly in the next few weeks’ or they will continue to show their power.’’
Bond yields
German 10-year Bund yields rose 1 basis point to 0.265 per cent, having hit a record low of 0.188 per cent last week. Most other euro zone bond yields were a tad higher, but Spanish, Italian and Portuguese yields edged lower — holding slightly above their record lows.
“Given that the Monday-Wednesday activity was 50 per cent above the daily target, a welcome slowdown in the pace of ECB purchases into the week-end should be seen,’’ Societe Generale strategists said in a note previewing the ECB data.
Irrespective of daily changes in the pattern of buying, the ECB will have a strong impact on the bond market, analysts say.
Citi strategists expect 10-year Bund yields to go negative.
“German paper should roll progressively towards -20 basis points,’’ they said, referring to the floor the ECB has set itself for purchases — its current deposit rate.