Selloffs resumed with a bang in European bond market as inflation ticked up across Euro zone in May. Sellers seem to be paying not much attention to European Central Bank’s (ECB) frontloading of asset purchase.
- Consumer price index surpassed expectation in May, with headline growing at 0.3% y/y compared to zero per cent prior. Core inflation grew sharply at 0.9% from a year ago, much higher than prior 0.6%.
- Rapid expansion of core inflation indicated, that demand might be picking up across Euro zone and weaker Euro is increasing the input costs of producers.
Spanish 10 year bond yield reached beyond 2%, highest level seen since November last year. Bonds have retreated across Euro zone. Chart courtesy Bloomberg markets.
German bund CFD dropped sharply, trading at 154.13 as of now. Bund traded as high as 155.75 yesterday, before sharp drop. Technically speaking price has made a large engulfing candle yesterday indicating possibilities of further rout. Bund might test support area at 152 once again.
Focus now shifts to tomorrow’s monetary policy meeting and press conference by European Central Bank.
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