LONDON, May 5 (Reuters) – Euro zone government bond yields were a touch lower on Tuesday, in line with softer oil prices, following a sharp selloff on \u200bthe previous day, with investors focused on developments in the Strait of Hormuz.<\/p>\n
Germany’s 10-year \u200cbond yield, the benchmark for the euro zone, was down 1 basis point at 3.075%, after a 5-bp jump in the previous session.<\/p>\n
Its rate-sensitive two-year yield was down 3 bps at 2.6911%, just off last week’s one-month high of 2.76%.<\/p>\n
Traders are closely \u200btracking the situation in the Gulf as they assess whether central banks will be \u200bforced to raise interest rates to prevent higher energy prices from spilling over \u2060into broader inflation, and if so when.<\/p>\n
U.S. Defense Secretary Pete Hegseth said on Tuesday the ceasefire with \u200bIran was not over, even as the U.S. and Iran exchanged fire in the Gulf and \u200bwrestled for control of the Strait of Hormuz.<\/p>\n
The European Central Bank kept rates unchanged last week, but debated a hike and signalled that policy tightening might be necessary in June.<\/p>\n
Bond yields rose sharply on Monday, driven by \u200ba jump in oil prices. As oil edged lower on Tuesday, yields fell.<\/p>\n
Government bond markets have \u200bsharply diverged from global stock markets. While equities, led by the U.S. and tech-heavy Asian bourses, are higher \u200cthan \u2060their pre-war levels, yields, which move inversely to bond prices, remain well above their levels from late February.<\/p>\n
Before the conflict, Germany’s 10-year yield was at 2.65% and its two-year at 2.00%.<\/p>\n
The difference between stocks and government bonds suggests “markets are treating the most likely outcome as a mild stagflationary shock, \u200benough to constrain central \u200bbanks, but not enough \u2060to pose more serious long-term risks,” Lotfi Karoui, multi-asset credit strategist at PIMCO, said in a note.<\/p>\n
“Put another way, risk assets appear to be \u200bmore willing to look through a period of potentially softer growth, higher \u200binflation, and \u2060constrained monetary policy, while rates can’t.”<\/p>\n
Other euro zone yields moved largely in line with the German benchmark.<\/p>\n
Italy’s 10-year yield fell 5 bps to 3.8867% and its two-year was down 1 bp at 2.8865%. ,<\/p>\n
Markets see Italian debt \u2060as more \u200bvulnerable than German. When yields have risen with oil \u200bprices, the gap between Italian and German debt has widened. It was last at 78 bps, 5 bps narrower on the day. It \u200bwidened by 3 bps on Monday.<\/p>\n
Reporting by Alun John. Editing by Jacqueline Wong, Mark Potter and Paul Simao<\/p>\n
Disclaimer:\u00a0The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and\/ or damages arising from the use of this publication.<\/p>\n","protected":false},"excerpt":{"rendered":"LONDON, May 5 (Reuters) – Euro zone government bond yields were a touch lower on Tuesday, in line…\n","protected":false},"author":2,"featured_media":32796,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2480],"tags":[1514,1503,1507,1509,1502,1512,1505,1504,2487,2486,2485,1506,687,1493,1513,6,1492,1515,1499,1516,1501,1496,1497,1495,1498,46,1500,1511,1517,1494,1510,1508],"class_list":{"0":"post-32795","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-euro-zone","8":"tag-bank-forecasts","9":"tag-bitcoin-news","10":"tag-central-banks","11":"tag-charts","12":"tag-crypto-news","13":"tag-currency","14":"tag-economic-reports","15":"tag-ethereum-news","16":"tag-euro-area","17":"tag-euro-zone","18":"tag-eurozone","19":"tag-forecasts","20":"tag-global-economy","21":"tag-gold","22":"tag-international-policy","23":"tag-interviews","24":"tag-kitco-news","25":"tag-market-nugget","26":"tag-metals","27":"tag-mining-minutes","28":"tag-mining-news","29":"tag-palladium","30":"tag-pgm","31":"tag-platinum","32":"tag-platinum-group-metals","33":"tag-politics","34":"tag-precious-metals","35":"tag-rare-earth-metals","36":"tag-roundups","37":"tag-silver","38":"tag-tech-metals","39":"tag-us-dollar"},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/posts\/32795","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/comments?post=32795"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/posts\/32795\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/media\/32796"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/media?parent=32795"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/categories?post=32795"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/europe\/wp-json\/wp\/v2\/tags?post=32795"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}