Eurozone government bond yields have mostly declined, retreating from the highest level in a month, while investors continue to assess the prospects for monetary policy of the ECB and the Fed.
German 10-year bond yields fell by 2.1 basis points to 2.482%, while the yield on 2-year bonds fell by 2.2 basis points to 2.935%. The yield on France's 10-year bonds fell by 1.4 basis points to 2.994%, while the yield on Italy's 10-year bonds rose by 0.5 basis points to 4.359%. The closely watched gap between Italian and German 10-year yields is now 187 basis points. Yields are still well below levels at the start of March, when the German 10-year stood at a more than 11-year high of 2.77%.
Against the backdrop of continuing high inflation, the policymaker of the ECB, the Fed and the Bank of England signaled that the tightening of monetary policy is likely to continue for some time. Yesterday's data showed that in March, consumer inflation in the UK fell less than expected - to 10.1% from February's 10.4%. This means that the UK has the highest level of consumer inflation in Western Europe.
Meanwhile, today the Federal Statistical Office (Destatis) announced that in March, producer price growth in Germany slowed down again (for the 6th month in a row), recording the slowest rate of increase since May 2021. According to the report, the producer price index increased by 7.5% per annum after a rise by 15.8% per annum in February. Economists had expected an increase by 9.8% per annum. On a monthly basis, producer prices fell by 2.6%, accelerating compared to February (-0.3%). Consensus estimates suggested a 0.5% drop.
Later today, the minutes of the ECB's March meeting will be released, at which the rate was increased to 3% from 2.5%. They will give investors further clues as to the feelings of ECB policymakers.