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Souring sentiment pushes eurozone bond yields to new two-month lows

Wed, 29th Jul 2020 08:43

* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr

By Abhinav Ramnarayan

LONDON, July 29 (Reuters) - High-grade eurozone government
debt yields dropped to their lowest levels in over two months as
a cocktail of negative news sent investors scrambling for safe
assets.

Poor corporate earnings, record deaths from COVID-19 in six
U.S. states and frictions over a stimulus plan in the United
States hit risk sentiment on Wednesday, and had investors
retreating to safe assets such as government bonds.

Fears of rising COVID-19 infections also hit Asia and Europe
this week, with several countries imposing new restrictions and
Britain quarantining travellers from Spain.

"The tally of COVID-19 cases is surging further, not only in
the U.S., with infection rates rising again in Europe as well
during the holiday period, maybe due to a certain excessive
carefreeness," analysts at DZ Bank wrote in a note.

"Meanwhile, the consensus over a second coronavirus relief
package which could be used to alleviate a second wave of the
pandemic is tottering, thus spawning growing concerns about the
outlook for the US economy."

German 10-year Bund yields dropped to a new
two-month low of -0.52% on Wednesday.

Other highly rated euro zone countries, such as The
Netherlands and Austria, also saw their government bond yields
hit the lowest level since mid-May.,

Worries over the world's biggest economy expressed
themselves in the dollar, which is near a two-year low against a
basket of currencies, and is down over 9% since the March
high.

Later on Wednesday, Germany will tap its 15-year benchmark
bond in a 3.5 billion euro auction.

A statement and news conference at the end of the two-day
U.S. Federal Reserve meeting is due later in the session. The
world's most important central bank said on Tuesday it will
extend several of its lending facilities through the year-end.
(Editing by Timothy Heritage)

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