Euro zone bond investors shrug as data confirms gloomy economy -November 23, 2023 at 04:32 am EST

LONDON, Nov 23 (Reuters) – Euro zone bond yields wavered
but found little direction on Thursday after survey data showed
the bloc’s economic downturn is likely to have continued in
November.

The yield on Germany’s 10-year bond, the
benchmark for the bloc, was last unchanged on the day at 2.57%.
Yields move inversely to prices.

Business activity in the euro zone contracted in November,
according to purchasing managers’ index (PMI) survey data
released on Thursday, although the figures were slightly less
bad than economists expected.

“Ongoing weakness in the euro zone business surveys suggests
a recession is on the horizon,” said Mike Bell, global liquidity
market strategist at J.P. Morgan Asset Management.

“There is no need for the ECB to hike rates any higher. The
main question now is around the timing and magnitude of cuts to
come.”

Italy’s 10-year bond yield was last 2 basis
points (bps) higher at 4.338%. The yield on France’s
10-year bond was up 1 bp at 3.138%.

PMI data from Germany showed that the euro zone’s biggest
economy fared better than expected in November, although
activity still contracted. German bond yields rose after the
release but then slipped back.

Yields on European and U.S. bonds have tumbled in recent
weeks, after hitting multi-year highs in October. Data has
suggested growth and inflation are cooling, making further
central bank rate hikes unlikely in the eyes of investors.

Germany’s 10-year yield, for example, has dropped from a
12-year high of 3.024% in early October. Italy’s is down from
5.025% last month, an 11-year high.

Trading on Thursday was more subdued than usual, with U.S.
traders set to be out for Thanksgiving and Japanese markets
closed for holiday too.

Germany’s 2-year bond yield, which is sensitive
to interest rate expectations, was last flat on the day at
3.017%. It has cooled from a 15-year high of 3.393% in July.

European Central Bank official and German central bank chief
Joachim Nagel on Wednesday said economic data would determine if
interest rates need to rise again. ECB official Isabel Schnabel
is due to speak on Thursday evening.

The ECB halted a streak of 10 straight hikes in October,
leaving interest rates at a record high of 4%.

Traders on Thursday reckoned the ECB will cut rates by
around 90 bps by December 2024, according to pricing in
derivatives markets, a bet that has held roughly steady since
the start of November.
(Reporting by Harry Robertson; Editing by Emelia
Sithole-Matarise)