Short-dated eurozone government bond yields edged lower on Tuesday as investors prepared for a busy schedule of economic data releases and speeches from leading central bankers at the European Central Bank’s annual forum in Sintra, Portugal.
The yield on Germany’s two-year government bond, which is particularly sensitive to expectations for ECB interest rates, stood at 2.52%. Bond yields move inversely to prices.
Meanwhile, the benchmark 10-year German Bund yield was little changed at 2.88%, remaining close to its lowest level in four months.
Bond markets recover after volatile quarter
European sovereign debt markets are ending a turbulent quarter during which bond yields climbed to multi-year highs as global energy prices surged amid the conflict involving Iran.
At the height of the tensions, concerns over potential supply disruptions prompted central bankers to contemplate a “higher-for-longer” approach to interest rates in an effort to contain energy-driven inflation.
As oil prices later retreated to levels seen before the conflict, inflation expectations moderated, supporting a broad rally in bond markets that pushed yields back towards multi-month lows.
ECB officials in focus at Sintra forum
Attention is now turning to comments from policymakers attending the ECB’s annual conference in Sintra.
Investors will closely monitor speeches from ECB Chief Economist Philip Lane and Executive Board members Isabel Schnabel and Frank Elderson for further indications about the future direction of eurozone monetary policy.
Schnabel, widely viewed as one of the ECB’s leading policy hawks, has consistently cautioned against relaxing restrictive monetary policy too quickly.
Her position reflects ongoing differences within the Governing Council as inflation gradually eases alongside stabilising energy prices.
The three-day conference will conclude with a closely watched policy panel featuring newly appointed Federal Reserve Chairman Kevin Warsh, making his first major international appearance since taking office, alongside Bank of England Governor Andrew Bailey and Bank of Canada Governor Tiff Macklem.
Markets are also awaiting inflation figures from France and Germany later on Tuesday, followed by eurozone-wide inflation data on Wednesday.
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