German yields hover near lows as COVID-19 deaths top half a million

LONDON: Safe haven German government bond yields rose on Monday after improving inflation and business sentiment data but didn't stray far from one-month lows hit last week as deaths related to the novel coronavirus topped half a million worldwide.

While the overall COVID-19 death rate has flattened in recent weeks, health experts have expressed concerns about record numbers of new cases in countries like the United States, India and Brazil, as well as new outbreaks in parts of Asia.

"There is a full event slate this week but, we fear, nothing that will drown out the background noise of rising COVID-19 cases," said ING rates strategist Antoine Bouvet.

"It looked like sentiment was defying gravity for a long time - and if there's one thing we learnt in Europe, at some point measures have to be taken to stop the spread of the disease, and the question is whether they will damage growth."

Germany's 10-year bond yield, the benchmark for the euro zone, was a basis point higher at -0.465%, above Friday's one month low of -0.484.

Other high-grade euro zone government bond yields were also about a basis point higher on the day after data showed that inflation in a number of German states rose in June compared to the month before.,

The overall figure for the whole country is due out at 14.00 CET.

Long-term euro zone inflation expectations hit a four-month high of 1.1061%, according to the five year, five year forward rate - a key market gauge of long term expectations.

This compares to 0.84% in mid-May and an all-time low of 0.7198% in March.

Economic sentiment in the euro zone also continued to recover in June after a modest pick-up in May, with improvements across all sectors and a much more buoyant sense of future business, European Commission data showed on Monday.

"While that sounds impressive, we have to keep in mind that a lot of numbers sound impressive these days and that the indicator is still very far below its February reading," ING economist Bert Colijn said in a note.

Reuters