European bonds gain as investors digest BoJ, Fed

The European bonds gained on Thursday after Bank of Japan surprised market with no rate cuts and United States Federal Reserve voted to keep policy rates steady, while giving no signal for futures policy moves. Also, weak risk sentiments among investors drove them towards safe-haven assets. The benchmark German 10-year bonds yield, which is inversely proportional to bond price fell 23.53 pct to 0.221 pct, French 10-year bunds yield dipped 9.25 pct to 0.580 pct, British equivalents tumbled 3.87 pct to 1.562 pct, Spanish 10-year bonds yield inched down 0.74 pct to 1.610 pct and Portuguese 10-year bonds yield fell 1.89 pct to 3.119 pct, Netherlands 10-year bonds yield inched lower 12.40 pct to 0.445 pct by 0910 GMT.

Moreover, the United States Federal Reserve left policy rate unchanged in a 0.25-0.50% range, in line with market expectations. One key highlight of the statement was the removal of the note that inflation has picked up in recent months, something that was seen as a budding concern in the wake of the March statement. However, the statement noted that the Committee continues to closely monitor inflation indicators and global economic and financial developments. Similarly, the Bank of Japan in its policy meeting left the monetary policy rate unchanged at -0.1 pct, against the market expectation of ease. I also kept its asset purchase program at ¥80 trillion per annum and ¥300 billion into ETFs.

Moreover, European bonds were also seen following the benchmark German bunds, while bunds rallied on weak employment change. The German April unemployment change plunge by 16K, against no change was expected, from revised 3K decline in March. Meanwhile, the unemployment rate stood at 6.2 pct (frozen from 4-month).

The markets in the Euro zone will now focus on Consumer Price Index (CPI), Q1 GDP and March unemployment rate to be released on Friday (0900 GMT).

Meanwhile, the pan-European STOXX 600 index down 1.47 pct and the euro-are blue-chip gauge, the STOXX 50, dipped 1.57 pct. The FTSE 100 Index is fell 1.34 pct, the DAX trading 1.30 pct lower and the CAC-40 tumbled 1.46 pct by 0910 GMT.