Eurozone government bond yields near multi-month lows amid economic worries

UNITED STATES, WASHINGTON (EDUFINTECH) – Borrowing costs in the eurozone eased marginally on Wednesday, holding close to multi-month lows hit yesterday amid concerns over global growth.

The yield on 10-year German government bonds fell one basis point to -0.42%, holding close to more than five-month lows reached the day before, at -0.44%.

The 30-year yield also lost one basis point, falling to 0.04%. Since the beginning of the week, it has dropped 8 basis points, close to 0%.

“The rally at these levels may be losing momentum, but the resilience of the eurozone bond markets looks set to continue,” said Christoph Rieger of Commerzbank.

Analysts say an auction of 30-year German bonds later on Wednesday could be a test of investor appetite for long-term bonds after the recent spike in prices and falling yields.

US Senate Democrats agree on infrastructure plan for another $ 3.5 trillion

UNITED STATES, WASHINGTON (EDUFINTECH) – Senate Democratic leaders have agreed on a $ 3.5 trillion investment plan that they intend to include in a budget resolution for discussion soon, Senate Majority Leader Chuck Schumer said Tuesday.

“We have come to an agreement,” Schumer told reporters after more than two hours of closed-door talks involving Senate Budget Committee Democrats and White House officials. The Republicans did not participate in these negotiations.

“Add that to the $ 600 billion bipartisan plan and you get $ 4.1 trillion, which is very, very close to what President Biden asked us to do,” Schumer said.

The bipartisan $ 1.2 trillion bill focuses on physical infrastructure such as roads and bridges, while the new $ 3.5 trillion bill focuses on elderly and child care, climate change and other non-traditional “human infrastructure.”

It is expected that 50 Republicans in the Senate will not support the plan, as a result of which Democrats will have to independently push the bill through the so-called budget approval procedure, which circumvents the rule requiring at least 60 votes to pass a document in the 100-member house.

US budget deficit decreased 5 times in June

UNITED STATES, WASHINGTON (EDUFINTECH) – The US budget deficit in June fell by 80%, or 5 times, to $ 174.161 billion, compared with a record $ 864.074 billion in the same month last year, the country’s finance ministry said. Budget revenues increased by 86.5% last month – to $ 449.199 billion from $ 240.829 billion a year earlier.

Costs fell 44% to $ 623.359 billion versus $ 1.105 trillion in June last year, which saw the peak in costs associated with the COVID-19 pandemic.

For the nine months of 2021 fiscal year, which began on October 1, the negative balance of the US budget decreased by 18.5% compared to the same period a year earlier and amounted to $ 2.238 trillion.

The volume of budget revenues since the beginning of the current fiscal year jumped by 35.2% – to $ 3.056 trillion, including due to the increase in taxes on income of individuals and companies.

Meanwhile, expenses increased by 5.8% and exceeded $ 5.294 trillion. This includes a significant jump in costs in the agricultural sector – by 35%.

The Congressional Budget Office (CBO) in early July presented an updated forecast, according to which in 2021 fiscal years the country’s budget deficit could be $ 3 trillion (or 13.4% of GDP).

The negative balance of the US state budget at the end of the 2020 fiscal year, which ended on September 30, grew 3.2 times and amounted to a record $ 3.132 trillion. At the same time, the deficit rose to 14.9% of GDP, which is the maximum since 1945. For comparison: during the financial crisis in 2009, it was equal to $ 1.413 trillion, or 9.8% of GDP.

The negative US budget surplus peaked at 27% of GDP in 1943, and then remained above 20% of GDP in 1943-1945.

The last time a budget surplus was recorded in the United States was in 2001.

Eurozone economic recovery remains fragile – Lagarde

UNITED STATES, WASHINGTON (EDUFINTECH) – The eurozone economy is starting to recover from the recession caused by the pandemic, but that recovery remains fragile, European Central Bank Governor Christine Lagarde said in an interview published Friday.

“We have agreed to maintain (emergency stimulus) measures at least until March 2022, and in any case until we consider that the crisis phase of the coronavirus is over,” Lagarde said in an interview with regional French publication La Provence. the economy is now starting to gain momentum, it remains fragile.”

Virus mutations pose risk to eurozone recovery – Lagarde

UNITED STATES, WASHINGTON (EDUFINTECH) – The eurozone economy may well avoid the most pessimistic scenario predicted at the start of the pandemic, but it still faces risks from virus mutations, European Central Bank chief Christine Lagarde said Thursday.

“The improved economic outlook amid rapid progress in vaccination has reduced the likelihood of dire scenarios,” Lagarde said at the European Parliament.

“Of course, the nascent recovery is still faced with uncertainty, including due to the spread of virus mutations.”

She served as Chair of the European Systemic Risk Council, the European Union’s supervisory authority for financial stability.

Activity in the eurozone industrial sector accelerates at a record rate in June

UNITED STATES, WASHINGTON (EDUFINTECH) – Business activity in the manufacturing sector of the European single currency continued to grow at a record pace in June, final data from market research firm Markit show.

The purchasing managers’ index (PMI), reflecting the activity of the sector, amounted to 63.4 points in June against 63.1 points a month earlier, exceeding the preliminary value of the indicator, which was also 63.1 points.

This is the steepest gain since June 1997, when Markit began researching it.

A value of 50 points separates an increase in activity from a decline.

The yield of EU government bonds declines in anticipation of economic data

UNITED STATES, WASHINGTON (EDUFINTECH) – Eurozone bond yields fell on Monday as investors awaited the release of key economic data.

The yields on most 10-year bonds fell slightly ahead of inflation and jobs data.

The yield on Germany’s 10-year bonds fell slightly to -0.20%.

The French far-right failed to win a single regional victory in Sunday’s elections, according to polls.

Berenberg chief economist Holger Schmiding said the prospect of replacing Marine Le Pen with centrist Emmanuel Macron in next April’s presidential election – a key risk – has diminished slightly since Sunday’s regional elections.

The yield on 10-year French bonds declined slightly, while the gap with the yield on German bonds remained at about 35 basis points.

Fed leadership: “temporary” surge in inflation may last

UNITED STATES, WASHINGTON (EDUFINTECH) – The period of high inflation in the US could last longer than expected, members of the Federal Reserve’s Open Market Committee (FOMC) said Wednesday.

Atlanta Federal Reserve Bank chief Rafael Bostic said he now expects interest rates to need to be raised in late 2022, given that the US economy is estimated to grow 7% this year and inflation will be well above the Fed’s target in 2%.

“Given the unexpected growth in the latest data, I have shifted my forecast,” Bostic said. He is among seven Fed officials who predicted at a central bank meeting last week that the overnight rate may need to be raised from its current near-zero rate next year.

Bostic and FOMC member Michelle Bowman said that while they largely agree that the recent price increases will be temporary, they also believe that inflation may take longer than expected to ease.

“The temporary will be a little longer than we originally expected … Instead of two to three months, it could take six to nine months,” Bostic said in an interview with NPR.

Bowman, speaking at the Federal Reserve Bank of Cleveland conference, agreed that prices are rising due to supply chain disruption and rising demand as the economy opens up – factors that should disappear over time.

However, she did not specify a specific timeline, saying that “it may take some time,” and this will need to be closely monitored while the Fed decides its policy.

Eurozone bond yields skyrocket after Fed hawkish meeting

UNITED STATES, WASHINGTON (EDUFINTECH) – Eurozone government bond yields jumped after a hawkier-than-expected meeting of the US Federal Reserve Board.

The Fed is now waiting for its first key interest rate hike in 2023 instead of 2024, and has begun debates about when and how it would be appropriate to start scrapping its massive bond-buying program.

The yield on 10-year German government bonds increased 4.5 basis points to minus 0.155%. During the trades, the indicator renewed its maximum yield since May 25.

The comparable figure for Italy’s 10-year bonds rose 6 basis points to a weekly peak of 0.841%.

ECB to maintain generous stimulus even as economic recovery picks up

UNITED STATES, WASHINGTON (EDUFINTECH) – The European Central Bank is almost certain to maintain a generous flood of stimulus after Thursday’s meeting, fearing that higher borrowing costs could offset the nascent economic recovery.

Still in the process of recovering from the pandemic’s double recession, the economies of 19 eurozone countries still rely on unprecedented ECB stimulus to stay afloat. And even with growth accelerating as COVID-19 restrictions ease, ECB officials seem to want to play it safe.

Recent comments from regulator Christine Lagarde and Governing Board member Fabio Panetta suggest that the June discussion has effectively ended before today’s meeting, and a cutback in bond purchases is unlikely, even if ECB officials acknowledge improved growth prospects and fast vaccination rates.

Panetta vehemently rejected any cut in emergency bond purchases, while Lagarde said it was “too early” to discuss winding down the ECB’s 1.85 trillion euro emergency asset purchase program (PEPP) .

While ECB officials can still choose a different course, they usually agree with the head of the central bank and rarely change proposals submitted to the executive council.

The regulator will announce the results of the meeting at 14.45 Moscow time, Lagarde’s press conference will begin at 15.30 GMT.