European Government Bonds May Drop; Concerns Over Faster Growth, Inflation


Debt fell yesterday, pushing two-year yields to the highest in more than a month, as reports showed German producer prices rose by the fastest in almost 24 years, and Belgian consumer sentiment rebounded in June. European Central Bank President Jean-Claude Trichet is due to speak today, and may flag the stronger data, according to Alessandro Tentori at BNP Paribas SA.

The yield on the benchmark German two-year bond, among the securities most sensitive to changes in rate expectations, rose 3 basis points yesterday in London to 3.46 percent, its highest since May 12. The price of the 3 percent bond due March 2008 fell 0.05, or 50 cents per 1,000 euro ($1,263) face amount, to 99.26. Bond yields move inversely to prices.

Goods from plastics to newsprint were 6.2 percent more expensive in May than a year earlier, the biggest increase since June 1982, a report yesterday showed. Economists expected a gain of 6.4 percent, according to the median of 34 forecasts in a Bloomberg survey. From April, prices rose 0.1 percent.

Rates Still `Low'

Consumer prices in the euro region rose 2.5 percent from a year earlier after gaining 2.4 percent in April, the European Union's statistics office said June 15. The reading matches an initial estimate of May 31 and the median forecast in a Bloomberg survey. Inflation erodes the value of a bond's fixed payments.

The Frankfurt-based ECB said in its monthly bulletin last week inflation may hold above its 2 percent ceiling this year and next, and that rates are still "low'' after being raised three times since December.

Policy makers at the ECB on June 8 lifted the refinancing rate to 2.75 percent. Economists expect the ECB to lift its benchmark rate to 3.25 percent by Dec. 31, according to a Bloomberg survey.

Interest-rate futures imply traders calculate the central bank will lift rates to 3.25 percent by year-end. The yield on the three-month Euribor contract due in December 2006 rose 2 basis points yesterday to 3.51 percent, from 3.07 percent at the start of the year. (Bloomberg)
OTP Redeems EUR 400 mln of Green Securities Banking

OTP Redeems EUR 400 mln of Green Securities

KDNP Pulls out of EPP After Tisza Joins Elections

KDNP Pulls out of EPP After Tisza Joins

Gloster Wins EUR 15 mln BMW Contract Deals

Gloster Wins EUR 15 mln BMW Contract

Int'l Travelers to Europe Prioritize Safety, Quality This Su... Tourism

Int'l Travelers to Europe Prioritize Safety, Quality This Su...


Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.