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Euro zone yields rise as rush to safe-haven assets pauses


Citi analysts said a range of 1% to 1.5% for the 10-year Bund yield looked fairer than 1.5% to 2%, adding there were reasons to be uncertain.&nbsp

ING analysts also said yields might have peaked recently but they argued implied volatility remained high and could still lead German borrowing costs to 2%. Germany's 10-year government bond yield, the bloc's benchmark, rose 3.5 bps to 1.27%. Trading was thinned by the U.S. Independence Day holiday.&nbsp

"Further downside for short-end rates looks limited," Commerzbank analysts said. "Further disappointing (economic) activity data could thus turn the latest bullish steepening into a long-end flattening. We still suggest buying Bunds into dips," they added.&nbsp

The spread between Germany's 10-year and 2-year bond yields widened from 40 bps in mid-June to around 80 bps last week. It was at 68.9 on Monday.&nbsp

Italy's 10-year government bond yield rose 6.5 bps to 3.27%, with the spread between Italian and German 10-year yields widening to 199 bps.

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The bond market is flashing a warning sign a recession may be coming. Here’s why (DE.VUCE) (DE.DBX0) (US.CBU0)


An “inverted yield curve” in the bond market is a distortion that has often occurred before U.S. recessions. This happens when short-term bond yields exceed those of longer-term bonds. It means investors are worried about the economy’s long-term prospects. The two-year versus 10-year yield on a U.S. Treasury bond is generally the most watched by economists. That curve hasn’t yet inverted, but another part of the market did on Monday.


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Bonds Flash Growth Warning as Global Stocks Mixed: Markets Wrap (DE.IUS5) (DE.DBX0) (US.CBU0)


Sovereign bonds tumbled, while European stocks gained and U.S. equity futures fell on Monday as economic risks from inflation and tightening monetary policy hit sentiment.

The U.S. 10-year Treasury yield climbed past 2.5%, above a technical trendline that’s served as a ceiling since the late 1980s. Bonds slid from Australia to the U.K., while Japan’s 10-year rate extended gains even after the country’s central bank announced two unlimited buying operations to keep yields below the top of its allowed range.


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Treasuries Threaten to Break Decades-Long Bullish Trend Line (DE.DBX0) (DE.VUCE)


The Treasury 10-year yield is on the verge of breaching a downward trend line that characterized the bond bull market for decades. During last decade’s interest-rate-hike cycle, “the 10-year tested its 200-day moving average for the first time since 1989” and this measure of momentum is currently at 2.65%, Ciana said. “Reaching this again would break the bull channel,” a shift that would indicate the yield could rise to 3.1% “and even 3.3%,” he said.


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Bond Market Wrestles With Risk of Inflation Becoming Unmoored (DE.DBX0) (DE.VUCE)


The bond market is starting to grapple with the risk that inflation could be tough to rein back. That’s the message from the sharp rise in a market gauge of price expectations over the next decade, one meant to factor out near-term volatility. The five-year five-year forward breakeven jumped to its highest since 2014 on Tuesday, just days after a straight 10-year measure notched a record in Bloomberg-tracked data going back to 1998.


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Treasuries Rout Extends With Fed Hike Looming, Five-Year Tops 2% (DE.DBX0) (DE.VUCE)


Treasuries fell Monday to extend this month’s rout in global developed-market bonds as investors anticipate the inflationary impacts of the war in Ukraine will spur aggressive monetary tightening. Five-year yields rose six basis points to surpass 2% for the first time since May 2019, while 10-year yields climbed four basis points to 2.04%. Yields across the curve are at or near multi-year highs, after a selloff last week delivered losses equivalent to Treasuries’ interest payments over the past year.


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