The interest rate on government bonds falls to the lowest level in three weeks, the difference with Italy is at the highest level in a week and a half.

Euro zone yields fell for a fourth straight session on Tuesday as investors increased their bets on interest rate cuts from the Federal Reserve and European Central Bank this year, following weak US employment data on Friday.

The yield on German 10-year bonds, the benchmark for the euro zone, fell 5.5 basis points (bps) to 2.418%, the lowest level since April 15.

Money markets have priced the ECB’s rate cuts in 2024 at around 75 basis points, a level reached last week after US data. They excluded 45 basis points of the Fed’s monetary easing, implying an 80% chance of a second cut in 2024.

A string of positive data from the world’s largest economy had investors expecting fewer than two Fed rate cuts this year, down from seven at the start of 2024. Because of the importance of the economy. In the United States, investors have also cut interest rates. their expectations relative to other major central banks.

“There is little standing in the way of the gradual decline in interest rates,” says Christoph Rieger, head of interest rate and credit research at Commerzbank.

“The light (data) schedule … is unlikely to change the view that the US economy is slowly losing steam.

The yield on Italian government bonds with a ten-year term fell by 3.5 basis points to 3.77%.

The spread between Italian and German 10-year yields – a measure of investor demand for risk premiums for holding bonds from the most indebted countries in the eurozone – rose by 4 basis points to 134.50 basis points, from a level of 135 .60, the highest level since April 26.

He short

to touch

a new one and a half month low at 120.20 on Monday.

Fitch

confirmed the BBB rating of Italy’s sovereign debt.

Preliminary data showed on Tuesday that orders for BTP-valore – a new retail bond being offered by Italy this week – reached 5 billion euros at 0940 GMT on the second day of the offering, up from 11.5 billion euros at the end of the second day. day of the February sale.

Private investors have maintained demand for peripheral bonds for months as they battle for the most attractive yields in a decade. Bond prices move inversely to interest rates. The yield on German 2-year bonds, which is more sensitive to interest rate expectations, fell by 1 basis point to 2.904%.

Data on Tuesday showed German exports rebounded in March, supported by strong US and Chinese demand, although a disappointing month for industrial orders suggested continued weakness in the economy.

“We expect rising real wages and loosening financial conditions to boost domestic demand in the coming quarters, with a rotation from services to goods,” said Christian Schulz, deputy chief European economist at Citi.

“However, we expect momentum to be dampened by fiscal normalization and the lagged effects of sharp monetary tightening,” he added.

ECB policymakers said on Monday they were increasingly confident about cutting rates as the economy returns to moderate growth and inflation appears to be under control.

Gross domestic product figures last week showed the eurozone economy grew 0.3% in the first quarter after a mild recession. Eurozone inflation fell to 2.4% in April. (Reporting by Stefano Rebaudo and Harry Robertson; additional reporting by Sara Rossi; Writing by Andrew Heavens, Mark Potter and Paul Simao)