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UPDATE 1-German yields stabilise after previous session rally; U.S. payrolls in focus

Fri, 4th Sep 2020 12:42

* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
(Adds chart and updates prices)

By Olga Cotaga

LONDON, Sept 4 (Reuters) - German government bonds
stabilised on Friday, having rallied the day before on the back
of a sell-off in tech stocks and a survey showing the euro
zone's rebound from its deepest downturn on record faltered in
August.

Traders will be watching for the U.S. payroll data later in
the day for confirmation of whether the U.S. economy is indeed
in trouble after Wednesday's disappointing ADP report, which
tends to act as a predictor for the official release on Friday.

"A disappointment in today’s U.S. jobs report could add to
the gloom, but after the recent vicious moves a lot may be baked
into the cake already," said ING analysts in a note to clients.

Economists polled by Reuters expect 1.4 million jobs to have
been added in August, less than 1.8 million the months before.
The unemployment rate, though, is expected to fall to 10.1% from
10.9%.

Euro zone yields were not bothered by the fact that orders
for German industrial goods rose by a weaker-than-expected 2.8%
in July, indicating an initial snap back from the coronavirus
shock is fading into a slower recovery in Europe's largest
economy.

Two European Central Bank monetary policy committee members
- François Villeroy de Galhau and Philip Lane - are due to speak
on Friday, ahead of the ECB meeting next week during which
analysts foresee more stimulus being added through the pandemic
emergency purchase programme (PEPP).

"If the added stimulus were indeed to materialise in the
form of an expanded PEPP envelope, that would be welcome news
given that even Germany now plans at least 80 billion euros of
new debt next year," ING analysts said.

German 10-year benchmark yield last traded neutral at -0.48%
, having fallen on Thursday to a 1-1/2-week low of
-0.50%. Two-year yields were also flat at -0.69%
after touching a one-month low of -0.71% the day before.

Italian 10-year yields fell 1.4 bps to 1.04%.

(Reporting by Olga Cotaga, Editing by William Maclean and Steve
Orlofsky)

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