UPDATE 1-Euro zone bonds unphased by uncertainty over Brexit trade deal, stimulus

  • 12/23/2020
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* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Adds details, updates prices) AMSTERDAM, Dec 23 (Reuters) - Britain’s unresolved trade relationship with the European Union post-Brexit, the impact of a French ban on British freight due to a new coronavirus strain and uncertainty over a U.S. stimulus package had little impact on euro zone bonds on Wednesday. In the United States, President Donald Trump threatened on Tuesday not to sign an $892 billion coronavirus relief bill, hopes for which have boosted risk assets. While European stocks and the British pound were higher on optimism around Brexit, euro zone bonds were unmoved with benchmark German 10-year bond yields steady at -0.59%. along with other higher-rated government bonds. Southern European 10-year bond yields were unchanged to 2 basis points higher. In Britain, France lifted a freight ban imposed over fears of a new, more infectious strain of the coronavirus, while a report suggested a Brexit trade deal is possible on Wednesday and Ireland’s prime minister said a deal is still likely. A British minister had said earlier a deal has not yet been clinched and serious issues remain. European Commission President Ursula von der Leyen and British Prime Minister Boris Johnson are expected to hold another call on Wednesday or Thursday, sources said. Peter McCallum, rates strategist at Mizuho, noted that currency moves were not particularly large, which may show fatigue on conflicting Brexit reports and expectations that U.S. stimulus uncertainty will be resolved. Bond moves, however, reflected a focus on the whether new variants of COVID-19 can be controlled by current vaccines. “It looks like they should, so we’re still on a similar outlook for next year,” McCallum said. After a big rally on Monday, when the market reacted to fears of the new COVID-19 variant, German 10-year yields are now just two basis points lower for the week. Bond market activity is also lower because the European Central Bank has halted its asset purchases over the holidays. Elsewhere, Italy will replace a zero-coupon bill with a new shot-term bond that offers a coupon and an 18 to 30 month maturity, its treasury said on Wednesday. (Reporting by Yoruk Bahceli; Editing by Larry King and Alexander Smith)

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