By 3 Minute Read* German inflation is anticipated to be 2.3 percent in June, according to polls* Bund rates are approaching one-month highs* The EU is expected to issue 5-year and 30-year bonds* Government bond yields in the Eurozone’s periphery tmsnrt.rs/2ii2Bqr (Reuters) – LONDON, June 29 (Reuters) – On Tuesday, ahead of the release of German consumer price data, euro zone government bond rates remained stable near recent highs, with surveys showing that inflation in Europe’s largest economy will exceed the European Central Bank’s target for the bloc. Investors have been paying particular attention to inflation numbers and what they might signal for continued central bank support, and German consumer prices have repeatedly exceeded the ECB’s objective of just under 2%. According to a Reuters survey, the result for June, which is due out at 1200 GMT, will be the same, at 2.3 percent. Various other German states are expected to release their own inflation data during the day, and North Rhine Westphalia (NRW), the country’s most populous state, has already reported inflation of 2.5 percent in June compared to the previous year. In a note, ING analysts noted that “we economists expect the reopening (of economies) will continue to force services pricing higher and make products prices more susceptible to the feed-through of rising input prices.” After the NRW data was released early Tuesday, euro zone government bond rates spiked initially before settling flat and staying near recent highs. For example, Germany’s 10-year bond yield remained steady at -0.187 percent, near to a one-month high of -0.146 percent but not close enough to cause worry. French 10-year bond yields were unchanged at 0.159 percent, after falling dramatically after far-right candidate Marine Le Pen did poorly in regional elections over the weekend. The reason for the gloomy tone is that euro zone authorities have gone to great lengths to demonstrate that they will not act quickly in response to any rises in inflation that they perceive to be temporary or driven by oil prices, according to analysts. “With the ECB’s promises, there is little that may upset the rate cart until at least September, when policymakers will decide on the pace of asset purchases again,” ING analysts said. However, German 10-year rates have climbed about 40 basis points so far this year, implying that each increase in inflation is pointing to a stronger rebound and a gradual withdrawal of support. The European Union is widely expected to announce and price its second Next Generation EU (NGEU) issuance later on Tuesday. Investors expect it to raise between 15 and 20 billion euros from the sale of 5-year and 30-year notes. (Abhinav Ramnarayan contributed to this report.) Mark Potter edited the piece.) Continue reading
