German bond yields fall to new lows since mid-March, Italian yields up

Credit: REUTERS/LEONHARD FOEGER

German government bond yields fell to their lowest since mid-March on Wednesday on coronavirus concerns and uncertainty about elections and prospects for stimulus in the United States, while Italian yields climbed ahead of Thursday's ECB policy meeting.

MILAN, Oct 28 (Reuters) - German government bond yields fell to their lowest since mid-March on Wednesday on coronavirus concerns and uncertainty about elections and prospects for stimulus in the United States, while Italian yields climbed ahead of Thursday's ECB policy meeting.

Germany's 10-year bond yield DE10YTT=RR was down 3 basis points, after earlier hitting -0.641%. Italy's 10-year yield IT10YT=RR was meanwhile 5 basis points higher at 0.75%.

"ECB anticipation and lockdown anxiety loom large," Commerzbank analysts told clients.

The European Central Bank is not expected to take action this week, but investors are keen to get a sense of how close it is to delivering another round of stimulus.

"The sluggish (Italian) BTP-performance signals sensitivity that Largarde might not deliver on market expectations tomorrow," Commerzbank analysts added.

Worries about a contested outcome of the U.S. vote also continue to weigh on risk appetite, after President Donald Trump questioned the integrity of the U.S. election again on Tuesday. Trump also acknowledged that a U.S. coronavirus economic relief deal was likely to come after the election.

The resurgent coronavirus pandemic is another source of uncertainty, with France expected to announce new restrictions later on Wednesday.

UK Vaccines Taskforce Chair Kate Bingham said on Tuesday that the first generation of COVID-19 vaccines "is likely to be imperfect" and "might not work for everyone".

(Reporting by Stefano Rebaudo, Editing by Catherine Evans)

((stefano.rebaudo@thomsonreuters.com; 0039 02 66129431))

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