Commentaries from European Central Bank (ECB) officials have successfully halted the rout in European bond market, however they have not been able to turn the recent tide completely. Longer end bonds still continue to hover at elevated levels compared to seen in April.
- German 10 year bund is trading in a range of 155 and 152, while yield remains trapped between 0.58% and 0.75%. Yields and bond prices move inversely.
Since last week US dollar has resumed its uptrend while Euro was pushed lower by front loading of asset purchases. Bond yields now stand as the only remaining piece to fit the puzzle.
Euro will surly move lower rapidly, if the trend is resumed for yields to move lower once again. However that might not be the case this time around.
European Central Bank's (ECB) asset purchase program are unlikely to influence longer dated yield much from here. It is unlikely for bond yields, longer dated ones to reach levels seen in April 2015.
As long as volatility remains low, longer dated yields at current levels or bit higher is of little concern. They are still at very low, compared to historic average.
Longer dated yields will only reach at April lows, should ECB increase asset purchase or deflationary fear returns.


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