Continuing their selling spree, foreign investors have pulled out nearly Rs 1,200 crore from the debt markets in the first two weeks of the month on higher fuel prices and possibilities of rate hike by the US Federal Reserve.
“Bond yields should edge higher this week because of supply pressures and as trade war concerns fade slightly, fostering more risk appetite,” said Chatwell.
The yield on two-year British govt bonds hit its highest level in over 6 weeks on Monday as investors saw a greater chance of Britain reaching a Brexit deal with EU.
Euro zone inflation hit 2 percent for the first time in more than a year in June due to surging energy and food costs, offering some comfort to the European Central Bank as it seeks to rein in its exceptional economic stimulus.
Germany’s government bond yields fell towards recent one-month lows on Wednesday as a row over migration policy in Germany’s coalition government rumbled on, raising concerns that the euro zone’s biggest economy could be headed for snap elections.
Italy’s borrowing costs fell sharply on Monday, after Italian economy minister Giovanni Tria said the new coalition government had no intention of leaving the euro zone and planned to cut debt levels.
Italy’s government bonds sold off , after new Prime Minister Guiseppe Conte promised to bring radical change as he sought parliamentary backing for an anti-establishment government.
Global shares rose as worries over a trade war between the US and other major economies took a back seat, with investors focusing on an easing of political risks in Europe and strong U.S. jobs data.
Euro won a reprieve, holding on to the strong gains it made, as Italian leaders moved to mitigate political turbulence and avoid a potentially disruptive early election.
Italian govt bond yields came off 14-month highs as the market paused after six days of heavy selling on concerns over the high-spending policies mooted by a potential coalition government.