Eurozone bond yields hold close to multi-month lows

* Eurozone periphery government bond yields tmsnrt.rs/2ii2Bqr

LONDON, July 21 (Reuters) – Eurozone borrowing costs edged down on Wednesday, remaining near the previous day’s multi-month lows as sentiment towards fixed income markets remained firm amid concerns linked to global growth.

Long-term sovereign bond yields in the United States and Europe fell 7-10 basis points this week as an increase in COVID-19 variants adds to the feeling that economic growth has now peaked and that any resumption of inflation will prove to be transitory.

Still, the rapid and furious moves in recent sessions seemed to subside for the time being as a calmer tone settled in global stock markets. US Treasury yields also appeared to stabilize overnight.

At the start of trading, the benchmark 10-year German bond yield fell only one basis point to -0.42%, remaining near the more than five-month low of -0, 44% of Tuesday.

Thirty-year bond yields fell by a similar amount to 0.04%. They have fallen 8 basis points this week to a striking 0% distance.

“The rally could lose ground at these levels, but the resilience of euro area government bond markets is expected to expand,” said Christoph Rieger, head of rates and credit research at Commerzbank.

Analysts said a sell off of German bonds 30 years later this session could be a test of investor appetite for long-term bonds after the recent surge in prices and falling yields.

A note of caution was also expected ahead of Thursday’s meeting of the European Central Bank (ECB). The ECB is widely expected to change its forward guidance to reflect a new inflation target following the results of a review of its strategy earlier this month.

The ECB is now targeting inflation at 2% against close to but below 2% previously.

Elsewhere, 10-year US Treasury yields were flat in London trading at around 1.20%, holding above Tuesday’s five-month lows.

Reporting by Dhara Ranasinghe Editing by Joe Bavier

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