By Yoruk Bahceli
AMSTERDAM, July 1 – Germany’s 10-year yield rose to a one-week high on Wednesday and were on course for their biggest daily jump in a month, with data supporting optimism as economies emerge from lockdown, while Portugal raised 4 billion euros via a 15-year bond.
Final investor demand for Portugal’s bond topped 41 billion euros, according to the lead managers.
Markets have been balancing risk aversion from rising coronavirus cases with confidence over the bounce-back in economic data in the past few sessions.
German retail sales rose in May by 13.9% compared with a Reuters forecast of 3.9%, reflecting a rebound in private consumption as Germany lifted its coronavirus lockdown.
The number of people out of work in Germany rose far less than expected in June, while the euro zone’s manufacturing sector contracted at a much slower pace than an earlier “flash” estimate showed, adding to signs of recovery.
Rainer Guntermann, a strategist at Commerzbank, said he struggled to see German 10-year yields falling below -0.50%, the level they approached going into last weekend, noting the lifting of European lockdowns.
“For Europe … the data is looking fairly OK. At the same time, we would warn that the sentiment numbers are overstating the underlying trend,” he said.
“What looks more like a V-shaped (recovery) in sentiment may not turn out as strongly in the real economic data.”
Germany’s 10-year yield rose to a one-week high, up nearly 8 basis points on the day to -0.384%, after hitting one-month lows in recent sessions when focus was on rising coronavirus cases.
Italy’s 10-year yield was up 1.7 bps to 1.34% after hitting its lowest since March on Tuesday.
Analysts said the recent rise in safe-haven yields were to be likely more flow-driven, with Commerzbank citing waning month-end support from index-tracking funds.
An outage at German electronic trading platform Xetra that affected some bond futures would have also made trading more challenging on Wednesday, said Mizuho strategist Peter McCallum.
Italy will raise its 2020 budget deficit to around 11.6% from the current 10.4% goal, a senior government official told Reuters on Tuesday, as it will approve a new 20 billion euro spending package in July. (Reporting by Yoruk Bahceli; Editing by Jane Merriman, Jan Harvey and Alison Williams)