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3 Minutes to Read 16 JULY (Reuters) – In subdued trade on Friday, Germany’s 10-year yield plummeted to a new three-month low as markets sought direction ahead of next week’s European Central Bank meeting. Analysts predicted that news about the coronavirus will raise government bond yields in the absence of big euro area data releases on Friday and ECB policymakers beginning their silent period ahead of next Thursday’s meeting. “For the time being, the transmission of the more infectious Delta form is the primary emerging danger,” said Deutsche Bank strategist Jim Reid, “with COVID-19 cases on the rise again at the global level and in most of the G7 economies.” Germany’s 10-year yield, the bloc’s benchmark, fell 1 basis point to -0.345 percent at 0717 GMT on Friday, the lowest since April 8. Italy’s 10-year yield fell to 0.72 percent, with the premium it offers over 10-year German bond yields at 105 basis points, after struggling to stay below 100 basis points this week. For the third week in a row, German and Italian government bond yields are expected to fall. Fed Chairman Jerome Powell’s dovish comments this week pulled yields farther down, adding to last week’s dramatic surge, when bets against increasing U.S. Treasury yields were unwound as growth assumptions were questioned. Given the bloc’s supply forecast, analysts predict euro area bond rates to remain low in the coming weeks. According to UniCredit analysts, debt management agencies are expected to issue roughly 50 billion euros in the next four weeks, which will be more than offset by future redemptions and coupon payments. “With supply slowing substantially and net issuance about to turn firmly negative over the next couple of weeks, the quest for yield appears set to continue, then also capturing non-core curves again,” said Christoph Rieger, Commerzbank’s head of rates and credit research. At 0900 GMT, the final June euro zone inflation reading will be released. A flash reading revealed a year-over-year growth of 1.9 percent, down marginally from May. Retail sales figures are due at 1230 GMT in the United States, while consumer mood data from the University of Michigan is due at 1400 GMT. Fitch Ratings will assess Greece’s credit rating later on Friday, which is currently two notches below investment-grade with a stable outlook. Yoruk Bahceli contributed reporting. Mark Heinrich did the editing./nRead More

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