The level of bond yields in Europe is rising again. The context of uncertainty characterized by concerns about the trend of inflation, exacerbated by the price increases in the energy sector and by the bottlenecks that are holding back industrial supplies, weighs heavily. Thus, at the end of the session, the ten-year BTP yield reached 0.86% from 0.81% yesterday. The ten-year Bund is also moving, reaching -0.19% from -0.22% the day before. Overseas, the T-Bond rate rose to + 1.54% (plus two basis points). The BTP / Bund spread is also recovering, which yesterday widened to 105 basis points.
The price rush
In the morning, attention was catalyzed by the data on consumer prices in Germany: in the country, harmonized inflation rose in September at a faster rate than expected and reached 4.1%. The data highlights the growing pressures on prices and supply difficulties for the largest European economy. The rate rose compared to the August survey which stood at 3.4%.
In September, Italian inflation confirmed its growth for the ninth consecutive month on an annual basis, above expectations, reaching a level not recorded since October 2012.
The trend can also be seen in Italy. According to provisional data released today by Istat, in September inflation showed a decline of 0.1% on the month and an increase of 2.6% on the year. Expectations were for a 0.3% decline and a 2.4% increase, respectively. In August the index had recorded increases of 0.4% on a monthly level and of 2.0% on an annual basis.
The fear of operators is that the trend in consumer prices could induce central banks to accelerate on the reduction of the ultra-expansionary monetary policy measures that have been introduced to stem the crisis caused by Covid-19. The trend casts a shadow over the ongoing global recovery. Central bankers have so far more reassured the markets and have always spoken of a “temporary” phenomenon.
“It will be very interesting to see how much of the current inflationary trends is actually due to the distortions linked to the pandemic and are these only temporary effects or not – says the CEE & Global Emerging Markets team of Raiffeisen Capital Management -. But even now it is noticeable that various problems in supply chains and a series of supply difficulties will prove to be more persistent than many initially assumed. It is entirely possible that this could give rise to one or another further inflationary impulse due to downstream repercussions. Even if it is unlikely that this will lead to a change in the behavior of the big central banks, it could however further fuel market discussions on the duration and extent of inflation risks and trigger some price movements ».