German Bunds on course for worst week in a month

AMSTERDAM: Bunds were set to close their worst week in a month on Friday but analysts expect pressure to abate given uncertainty around the spread of the coronavirus and central bank support.

10-year German yields are up 4 basis points this week, set for their biggest weekly rise since the week ending June 5 .

They briefly rose to three-week highs on Thursday after a number of economic data releases surprised to the upside earlier in the week, though analysts said technical factors were key.

But Bunds managed to retrace some losses, and yields fell later on Thursday despite employment data proving better than expected in the euro zone and the United States, where a record number of jobs were created in June, buoying US equities. A boost to investor risk appetite would usually hurt safe-haven bonds.

"It is quite telling that core government bond yields did not manage to move higher on a day when a surprisingly positive US labor market report was released," UniCredit analysts told clients.

"This somehow underscores our firmly held view that UST (US Treasury) and Bund yields will have a hard time finding a way up over the next few weeks."

ING analysts expect 10-year German yields to fall towards -0.50% in the short-term, citing the number of new coronavirus infections in the United States.

Bonds appeared to confirm those expectations on Friday, with Germany's 10-year yield down 1 basis point to -0.44%, while Italy's 10-year yield was up 1 basis point to 1.30%, off its lowest since late March hit earlier in the session.

The United States reported more than 55,000 new COVID-19 cases on Thursday, a new daily global record, as infections rose in most states.

The plunge in euro zone business activity eased sharply last month and was less than a preliminary reading as more businesses reopened, adding to a number of data releases that provided positive surprises in recent sessions.

Italy's Treasury said on Friday it set the minimum annual coupon rates on a new 10-year "BTP Futura" bond targeted at retail investors, which step up with time, at 1.15%, 1.30% and 1.45%.