German yields fall from 2013 peak after weak corporate activity data

September 23 (Reuters)German bond yields fell from 9-year highs on Thursday as data on business activity continued to point to a weakening economic outlook.

S&P Global’s flash composite Purchasing Managers’ Index for Germany, which tracks both manufacturing and services, fell to 45.9 in September from 46.9 in August and fell below from a consensus of 46.0, while the services reading is even further below the consensus.

However, activity in France was better than expected. The eurozone reading confirmed a slowdown in activity across the bloc, which is likely entering recession.

Germany’s 10-year yield, which rose above 2% for the first time since 2013 in early trading on Friday, fell 7 basis points on the day following the data and fell 5 basis points to 1, 92% at 0805 GMT. DE10YT=RR

“Today’s Eurozone PMIs underscore the growing economic pain the ECB is prepared to tolerate as it focuses on inflation,” ING analysts told clients.

While German 10-year rates were down on Friday, they still had to end the week up 16 bps.

Two-year yields, sensitive to interest rate expectations, were expected to end the week up 26 basis points, the biggest weekly rise since early June, as investors continue to raise their bets on the magnitude rate hike by the European Central Bank.

They continue to set hikes of 70 basis points in October and another 65 basis points in December, but have risen where they see rates peaking at nearly 3% at the end of 2023, from around 2.7% a year ago. one week. EUESTECBF=ICAP

The focus was also on Italy, ahead of Sunday’s elections, which are expected to be won by a right-wing bloc.

The closely watched Italian-German 10-year yield spread was 219 basis points on Friday, close to its lowest since mid-August. DE10IT10=RR

Piet Christiansen, chief analyst at Danske Bank, said Italian bonds have performed well against the Bund in recent sessions ahead of Sunday’s Italian parliamentary election.

“As even (favorite Giorgia Meloni) has said they want to stick to EU fiscal rules and there’s been no mention of ITexit, rates markets haven’t given it much lately. be careful,” he said, referring to the risk of Italy leaving the European Union.

(Reporting by Yoruk Bahceli; Editing by Edmund Klamann)

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