LONDON, May 26 (Reuters) - Euro zone government bond futures opened lower on Monday with softer U.S. Treasuries, but volumes were expected to be less than half normal levels due to market holidays in the UK and United States.
No major data from the euro zone is due to be released during the session.
On Friday, euro zone government bond yields eased after soaring during the week to multi-month peaks as investors squared up positions and readied for the long weekend.
At 0607 GMT, the June Bund future <FGBLc1> was down 10 ticks on the day at 112.96, having opened at 113.01.
The interest rate-sensitive two-year Schatz yield <EU2YT=RR> was up 1.4 basis points at 4.221 percent. ((Reporting by George Matlock; george.matlock@reuters.com; Reuters Messaging: george.matlock.reuters.com@reuters.net; +44 20 7542 2508; editing by David Stamp))
Keywords: MARKETS BONDS EURO
By George Matlock
LONDON, May 23 (Reuters) - Euro zone government bonds snapped back from earlier softness on Friday after European bourses opened weaker <.FTEU3> and U.S. Treasuries reversed earlier losses.
Bunds showed little reaction to euro zone flash estimates for the Purchasing Managers' Index (PMI). The composite PMI was 51.1 in May, below a 51.6 forecast, but still above 50.0 which separates expansion from contraction of the economy.
The services component was estimated at 50.6, below a forecast of 51.7 while the manufacturing sector registered 50.5 - in line with the forecast.
June Bund futures already headed a third of a point higher before the euro zone PMI data was released, as equities extended initial losses.
"The market has racked up gains but it is a thin market. There could be some book-squaring going on today, before the UK and U.S. market holiday on Monday, but that holds true if you think there are shorts to be covered. We are rather of the opinion there are people bailing out of longs," said a trader in London.
At 0810 GMT, the interest rate-sensitive two-year Schatz yield <EU2YT=RR> was down 2.2 basis points at 4.189 percent.
The 10-year Bund yield <EU10YT=RR> was down 3.3 basis points at 4.275 percent, while the 50-year benchmark <EU50YT=RR> was down 2.4 basis points at 4.792 percent.
The June Bund future <FGLBc1> was up 27 ticks on the day at 112.94, pulling away from 112.53 - its lowest level since late October - struck earlier in the session.
Into next week, the main focus was likely to be a hefty amount of supply concentrated on 10-year debt in the euro zone.
"We have a lot of 10-year bond auctions next week and it comes after investors made trade-lengthening moves this week, exiting two-year debt and buying into 10-year paper," said Marc Ostwald, a bond analyst at Insinger de Beaufort in London.
"The effect of this is that bond auction results next week risk being poor as investors won't want the supply. We have two-to-three weeks of heavy 10-year bond supply coming," he added.
Overnight, Treasuries edged down in Asia <TYv1> as Tokyo shares edged higher <.N225> -- the latter getting some reprieve after oil prices hit a record high above $135 a barrel <CLc1> this week but eased on Friday.
But raised inflation worries have convinced investors the Federal Reserve's next move will be to raise interest rates from 2.0 percent, with short-term rate futures pricing in a small chance of two quarter-point rate hikes before the end of the year <FEDWATCH>. (Editing by David Christian-Edwards) ((Reporting by George Matlock; george.matlock@reuters.com; Reuters Messaging: george.matlock.reuters.com@reuters.net; +44 20 7542 2508))
Keywords: MARKETS BONDS EURO
LONDON, May 23 (Reuters) - Euro zone government bond futures dipped at the opening on Friday, following softer U.S. Treasuries and awaiting a plethora of European data.
Treasuries edged down in Asia overnight <TYv1> as Tokyo shares edged higher <.N225> -- the latter getting some reprieve after oil prices hit a record high above $135 a barrel <CLc1> this week.
Raised inflation worries have convinced investors the Federal Reserve's next move will be to raise interest rates from 2.0 percent, with short-term rate futures pricing in a small chance of two quarter-point rate hikes before the end of the year <FEDWATCH>.
Market focus will turn to euro zone data, with French consumer spending for April due at 0645 GMT, followed by French May flash services Purchasing Managers' Index (PMI) at 0700 GMT, German flash PMI at 0730 GMT, euro zone flash PMI at 0800 GMT and Italian preliminary first quarter gross domestic product at 0900 GMT.
At 0607 GMT, the June Bund future <FGLBc1> was down five ticks on the day at 112.62, its lowest level since Dec. 27.
The interest rate-sensitive two-year Schatz yield <EU2YT=RR> was up 2.6 basis points at 4.237 percent. ((Reporting by George Matlock; george.matlock@reuters.com; Reuters Messaging: george.matlock.reuters.com@reuters.net; +44 20 7542 2508))
Keywords: MARKETS BONDS EURO
(Updates to late trade)
By Ian Chua
LONDON, May 22 (Reuters) - Euro zone government bond yields climbed on Thursday with the two-year Schatz yield piercing through 4.2 percent for the first time since mid-October as fresh peaks for oil fuelled inflation worries.
Surging commodity prices along with better-than-expected economic data this week have shifted market focus squarely on to inflation and away from slowing global growth, lifting yields as rate cut expectations faded.
"Inflation is currently driving the market," said Bob Maes, fixed income strategist at KBC in Brussels.
"With oil prices moving higher and inflation expectations also rising these are having an impact on the short-end of the European bond market in particular and the yield curve is becoming flatter every day."
At 1637 GMT the two-year Schatz yield <EU2YT=RR> was up 8.0 basis points at 4.20 percent, not far off the session peak of 4.218 percent -- the highest level since mid-October.
The 10-year Bund yield <EU10YT=RR> gained 3.0 basis points to 4.297 percent after earlier setting a 4-1/2 month high of 4.307 percent.
These moves saw the 2-10 year yield curve flatten further with the gap now at just below 10 basis points -- the narrowest since August.
"The focus is more and more in inflation concerns so altogether we're not very positive on the bond market and especially the short-end," said Natalie Fillet, senior interest rate strategist at BNP Paribas in London.
June Bund futures <FGBLc1> last traded at 112.70, down 27 ticks from Wednesday's settlement close, after having carved out a 4-1/2 month trough of 112.64 earlier.
The convincing breach of 112.81 support has paved the way for a test of 112.58 and 112.29 on the long term charts, analysts at Nomura said.
Interest rate sensitive Euribor futures fell as much as 13 ticks across the 2009 strip, driving their implied yields higher as expectations for ECB rate hikes continued to mount.
Traders said the Euro Overnight Index Average (EONIA) curve is now pricing in a more than 50 percent chance of a rate hike by year-end.
Oil hit a fresh peak for a third consecutive session, topping $135 a barrel on supply worries and after a big drop in U.S. crude stocks. U.S. crude <CLc1> struck an all-time high of $135.09 and has risen more than $21 this month.
European Central Bank Governing Council member Axel Weber said on Thursday that food and energy prices were heightening the pressure on inflation, but he did not comment on current economic conditions in the euro zone, or the outlook for interest rates, which the ECB has held at 4.0 percent for the last 11 months.
Data on Thursday showed an unexpected fall in the number of U.S. workers filing for initial jobless benefits claims, this followed a report on Wednesday that showed a surprising improvement in German business morale.
In the swap market, the 10-year spread was little changed at 40 basis points, while the 2-year spread narrowed to 61.8 basis points from just above 62 basis points late on Wednesday.
The 2-10 year swap curve inverted further with the 10-year rate <EURAB6E10Y=> now trading 11.3 basis points below the two-year rate <EURAB6E2Y=>.
On Friday, the market will take its cue from Euro zone flash Purchasing Managers' Indexes for Manufacturing and Services <EUPMSF=ECI> sectors due at 0800 GMT as well as U.S. existing home sales data for April at 1400 GMT.
((ian.chua@reuters.com; +44 207 542 1028; Reuters Messaging: ian.chua.reuters.com@reuters.net))
Keywords: MARKETS BONDS EURO
--------------MARKET SNAPSHOT AT 1541 GMT ------------------
Futures continuous contract basis
FUTURES CASH YIELD
THREE MONTH EURO 95.150 (-0.020) 4.016 (+0.001)
TWO-YEAR SCHATZ 103.04 (-0.15) 4.200 (+0.080)
10-YEAR BUND 112.70 (-0.27) 4.298 (+0.031)
30-YEAR BUND 4.728 (-0.001)
Current levels versus prior European close
------------------------------------------------------------
Reuters Terminal users can see related statistics,
contributions and news by clicking on:
NEWS
Euro debt market [GVD/EUR] Debt technicals [TECH/DBT]
Euro news headlines [EUR-T] ECB news headlines [ECB-T]
European debt news [EUROPE-D] West Europe debt news [WEU-D]
All EU news [EU-LEN] All technical reports [INSI]
Eurobond market [EUB/] Eurobond glance [GLANCE/EUB]
PRICES/INDICES
Euro benchmark curve <0#EUBMK=>
EMU debt market overview <0#EUROCOMP>
Euro government debt indices <0#GOVTOP>
Euro corporate bonds indices <CORPTOP>
World yield index <YLDS1>
Bunds (Eurex) <0#FGBL:>
SPEED GUIDES
European debt - links to news and prices <EUR/DEBT>
European debt by country <EUROPE/DEBT>
Euro <EURO>
Economic Indicators <EUROLAND01>
G7 Economic Indicator forecasts <G7DIARY2>
Currency & interest rate swaps <SWAP/1>
Keywords: BONDS XREF
LONDON, May 22 (Reuters) - Euro zone government bond futures plumbed fresh session lows in early afternoon trade on Thursday, tracking U.S. Treasuries after a surprise decline in weekly U.S. jobless claims.
The number of U.S. workers filing initial claims for jobless benefits unexpectedly fell by 9,000 last week to its lowest level in a month, but it remained at elevated levels, underscoring a sluggish jobs market.
June Bund futures <FGBLc1> touched a session low of 112.67 from 112.80 just before the data. They were down 24 ticks on the day at 112.73 at 1238 GMT.
The two-year cash yield <EU2YT=RR> rose 9.1 basis points to a seven-month high of 4.212 percent, while 10-year yields <EU10YT=RR> climbed 3.5 basis points to 4.302 percent. ((ian.chua@reuters.com; +44 207 542 1028; Reuters Messaging: ian.chua.reuters.com@reuters.net))
Keywords: MARKETS BONDS EURO
Next: EURO GOVT-Bunds reach session lows, tracking UK gilts