The European bonds were trading modestly firmer on Wednesday as investors await for Federal Reserve’s monetary policy meeting and Federal Reserve Chair Janet Yellen’s speech in an attempt to estimate the Fed's likely next step to raise interest rate. The benchmark German 10-year bonds yield, which is inversely proportional to bond price fell 1.33 pct to 0.298 pct, French 10-year bunds yield dipped 0.25 pct to 0.636 pct, British equivalents tumbled 0.72 pct to 1.650 pct, Spanish 10-year bonds yield inched down 2.63 pct to 1.594 pct and Portuguese 10-year bonds yield fell 4.10 pct to 3.204 pct, Netherlands 10-year bonds yield inched lower 0.59 pct to 0.508 pct by 0920 GMT.
Today, the U.S. Federal Reserve will announce its policy decision at 1800 GMT; markets largely expect that interest rates will be kept steady with a slim possibility of a surprise hike. Moreover, focus will be on the press statement and whether there is a shift across the Fed members to a more hawkish stance. Even subtle changes in the wording of its statement will tell us a lot about the probability of a June hike. Recent comments have been far more hawkish than the market is currently pricing in on rates.
The European bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the European Central Bank's target. Today, crude oil prices rose by tracking weak greenback and strong investor sentiment. Meanwhile, Crude oil prices continue to rover near to 2015 high. WTI was further supported after the American Petroleum Institute (API) reported a draw of almost 1.1 million barrels in U.S. crude inventories a week ago versus markets desires for a 2.4 million-barrel build in a Reuters survey. The International benchmark Brent futures rose 2.13 pct to $46.54 and West Texas Intermediate (WTI) climbed 1.77 pct to $44.82 by 0900 GMT.
Earlier, Spanish bonds were trading weak as Spain is confronting its second election in just 6-months after a last round of talk to form a coalition government fizzled. Spain's benchmark 10-year bond yield rose 1.1 bps to 1.65 pct, according to Reuters.
The markets in the Euro zone will now focus on Consumer Price Index (CPI), Q1 GDP and March unemployment rate to be released on Friday (0900 GMT). The investors will also look forward to next week’s FOMC meeting on Wednesday, 27th April.
Meanwhile, the pan-European STOXX 600 index down 0.01 pct and the euro-are blue-chip gauge, the STOXX 50, dipped 0.03 pct. The FTSE 100 Index is fell 0.23 pct, the DAX trading 0.15 pct higher and the CAC-40 climbed 0.06 pct by 0920 GMT.
