BERLIN: The two-day rally in Europe’s bond market proved short-lived, with investors reducing holdings of securities that still have yields near historic lows.
Germany’s bonds joined those of Italy and Spain to slip for the first time since May 13. Greece’s two-year note yields rose to the highest this month with the nation still lacking an accord with creditors.
The jump in Italian 10-year yields left them more than 35 basis points, or 0.35 percentage point, higher than their level at the end of April. Investors have cut holdings as higher oil prices and signs of a nascent economic recovery in the region created concern that yields weren’t sufficient to compensate for potential inflation.
“There are a lot of people out there who would like to sell into any rally in bunds,” said Lyn Graham-Taylor, a rates strategist at Rabobank International in London. “This is a classic case where a lack of liquidity in the market sees any move being exaggerated.”
Benchmark German 10-year bund yields rose three basis points to 0.65 percent as of 10:14 a.m. London time. The 0.5 percent security due in February 2025 fell 0.3, or 3 euros per 1,000-euro ($1,139) face amount, to 98.525.
