3 Minutes to Read (In paragraph 1, removes the inaccurate reference to the day of the week.) * Government bond yields in the Eurozone’s periphery tmsnrt.rs/2ii2Bqr Reuters, July 8 – On Thursday, euro zone bond rates fell slightly as a global bond rally continued and investors’ attention shifted to the European Central Bank’s policy review. According to a Bloomberg News story citing sources familiar with the situation, European Central Bank policymakers have agreed to lift their inflation objective to 2%, up from close to but below 2% currently, and to provide room to overshoot that target “when needed.” With such a change to adopt a symmetrical inflation target – when a central bank responds to both undershoots and overshoots – already predicted by the market, the focus will be on the details, which will be announced officially at 1100 GMT, followed by a news conference at 1230 GMT. The bank will also release the minutes from its June meeting. The announcement had little influence on the markets, as euro area bond yields declined on Wednesday as a global bond rally headed by US Treasuries continued. “We’ve gotten a lot of conflicting information from these stories. It’s utterly egregious that they’re going to tumble below 2% “pected,” ING senior rates analyst Antoine Bouvet said. “It could even be a letdown if (ECB President Christine Lagarde) doesn’t offer any more dovish soundbites or if they stop there.” In terms of how the target might be met, UniCredit analysts are interested in seeing if the ECB would allow its conventional asset purchases to deviate from self-imposed limits on how much of each issuer’s debt it can buy – a flexibility that defines the ECB’s pandemic emergency bond purchases, which are set to slow later this year and expire in 2022. By 0738 GMT, German 10-year yields, the euro zone’s benchmark, had fallen 3 basis points to -0.32 percent, led by 10-year yields in the United States, which had fallen nearly 4 basis points. The risk premium on Italian bonds, which have benefited from ECB support, has increased to 105 basis points. Hedge funds unwinding bets on rising US Treasury yields once the 10-year benchmark dipped below 1.40 percent, according to market participants. However, it also reflects concerns about the emergence of the COVID-19 delta version, which is more infectious, as well as unhappiness with economic data. According to the minutes of the Federal Reserve’s June meeting, officials last month judged considerable progress on the US economic recovery “had yet to be met,” but agreed they should be ready to intervene if inflation or other dangers developed. The minutes provided little insight into when the Fed may begin to reduce its monthly asset purchases, and Treasury rates fell as a result. Yoruk Bahceli contributed reporting, while Angus MacSwan edited the piece./n
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