European bonds traders can have a breath after two weeks of political events in the world and prospects for monetary policy. There are almost no important economic data from the Eurozone to be published next week, so traders can focuse on the referendum on constitutional changes in Italy on December 4 and policy meeting of the European Central Bank (ECB) on December 8. There is a possibility the Italian vote to lead to the resignation of Prime Minister Matteo Renzi, while for ECB are growing speculation that will be introduced more buying bonds to support the regional economy.
The pause on the bond market will be a major change from the last days in which the victory of Donald Trump in the presidential election in USA sparked expectations for increased government spending and promote inflation. This, together with the assessment of traders, it is almost certainly raise interest rates by the Federal Reserve in December plummeted European bonds as part of a record global sell-off.
The prices of Italian and Spanish government bonds continued to fall, marking the fourth consecutive weekly decline, but German government bonds rose.
The yields on 10-year German government bonds fell by 4 basis points, or 0.04 percentage points this week to 0.27% at the close of the London Stock Exchange on Friday. The bonds without coupons rose by 0.345 points, or 3.45 EUR to 1000 EUR nominal amount, to 97.389 points. The yield reached a 10-month high of 0.4% on November 14.
The yield on Italian 10-year government bonds rose by 7 basis points this week to 2.09%, even after reaching 2.23% on Monday, which was the highest value since July 2015. Meanwhile, the yields on Spanish government bonds reached their highest level after the vote for Brexit of 1.69% on Friday.
The expectations for higher interest rates from the Federal Reserve next month were highlighted by comments from President Janet Yellen this week that it is inevitable action.
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