A surge in euro-area sovereign bond spreads extended on Friday, sending the yield gap between France and Germany to the widest since the euro-zone crisis. Rates on German 10-year debt fell nine basis points to 3.42% on Friday, while French yields rose two basis point to 4.94%. That's left the gap between them at 152 basis points — headed for the most since 2011, when Greece's fiscal problems sparked a market panic that eventually forced the ECB to intervene to shore up the euro.
Energy-led inflation fears have been compounded by a resurgence in concerns that France will fail to get its spending under control against a divided political backdrop. The government's budget proposal it submitted Thursday was described as "optimistic" by the nation's fiscal watchdog.
"The moves have been eye-watering," said Kim Crawford, global rates portfolio manager at JPMorgan Asset Management, on Bloomberg TV. "A lot of de-risking has come into the market at a pace and scale that the market has struggled to absorb. This positioning washout has to finish, it's an open question whether it already has."
Markets are starting to factor in the impact of surging borrowing costs in the region's periphery on the bloc's economy. That's led traders to aggressively trim back their bets on the scope for interest-rate increases from the ECB, with money markets now pricing between two and three hikes by the end of next year — compared with four fully priced earlier this week. The yield jump in countries with bigger debt burdens marks an "unwarranted tightening of financial conditions" that imperils growth, according to Steve Ryder, senior portfolio manager at Aviva Investors. "It could act as a circuit breaker for rate expectations."
来源: Bloomberg Markets · 由HeadlinesBriefing整理摘要