Government bonds drop as eurozone inflation hits new high

Government bonds fell Tuesday the following day Inflation figures are hotter than expected in the eurozone And rising oil prices have intensified questions about how much central banks will raise interest rates and how much this monetary tightening will limit growth.

In Europe, the 10-year yield on the German Bund – a proxy for recruitment costs across the eurozone – added 0.07 percentage points to 1.12%, extending the sell-off from the previous session after German inflation figures also came in worse than expected. Italy’s corresponding yield rose 0.12 percentage points to 3.11%. Yields on longer bonds move with growth and inflation expectations.

US bonds fell similarly, with the yield on the 10-year Treasury bill climbing 0.1 percentage points to 2.84%.

These moves came after data on Tuesday showed that consumer price growth in the eurozone reached 8.1% in May, up from 7.4% in April and higher than economists’ expectations of 7.7%.

Jim Poulsen, Chief Investment Officer of the EU’s Lotold Group agreement A ban on most Russian oil imports was the main motive for selling bonds on Tuesday.

Brent crude, the international oil index, rose 1 percent to $ 122.85 a barrel, a move that raised concerns about even higher inflation and further interest rate hikes in the U.S. and Europe, Poulsen added.

“[Rising energy prices] Will enter into [the US] “The consumer price index raises the ghost of the fear that inflation will not moderate as quickly as we thought it would,” he said. “It’s a change from last week and it’s what really hurts stocks and bonds.”

In the stock markets, the Wall Street S&P 500 was fixed in the middle of Tuesday afternoon trading in New York after falling in early trades. The high-tech Nasdaq Composite rose 0.4%. Europe’s regional stock index Stoxx 600 ended the day down 0.7%, while the German DAX closed down 1.3%.

Inflation that remains stubbornly high will put further pressure on the European Central Bank to raise interest rates, said Caspar Almagrin, head of the Amundy equities division, Europe’s largest asset manager. “The direction of travel from a number of data points shows that inflation in Europe is surprisingly upward. We have not yet seen the peak.”

In anticipation of Tuesday’s European inflation data, Philip Lane, the ECB’s chief economist, said that quarterly interest rate hikes in July and September would be hers. “Criterion rate”. He noted in an interview with Spanish business newspaper Cinco Días that the process of stimulus withdrawal “should be gradual”.

The prospect of rising rates and slowing growth creates an “anti-gold” scenario for markets where there are no bonds or attractive stocks, said Honey Reda, a multi-asset strategist at PineBridge Investments.

Elsewhere in equities, the Hong Kong Hong Kong Index rose 1.4%, after data showed China’s manufacturing activity in May contracted at a slower pace than the previous month. The official purchasing managers’ index in manufacturing rose to 49.6, compared with 47.4 in April. Any reading below 50 indicates a contraction.

Shanghai also announced Monday night that it has partially relieved some of the Corona virus’ locking restrictions.

Government bonds drop as eurozone inflation hits new high Source link Government bonds drop as eurozone inflation hits new high

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