Eurozone periphery bonds strengthen on ECB policy easing hopes

The Eurozone periphery bonds strengthened Wednesday as investors poured into safe-haven assets after reading weaker than expected United States economic data, which pressurised the European Central Bank for further monetary easing.

The French 10-year bond yields, which moves inversely to its price, fell nearly 1 basis point to 0.111 percent, Irish 10-year bonds yield dipped 1 basis point to 0.369 percent, Italian equivalent ticked lower 1 basis point to 1.090 percent, Netherlands 10-year bonds yield slid 1 basis point to -0.008 percent, Portuguese equivalents inched 1/2 basis point lower to 3.000 percent, Spanish 10-year bonds yield remained steady tumbled 2 basis points to 0.943 percent by 09:50 GMT.

The European Central Bank monetary policy meeting that concludes with President Mario Draghi's press conference is scheduled to take place on Thursday by 12:30 GMT and it is widely expected to result in a decision to extend the central bank's quantitative easing programme.

Also, we foresee that the President Mario Draghi is likely to make some technical adjustments to it, but little of broad market significance. The President will reiterate the ECB's easing bias but will probably stop short of signalling any further action.

Moreover, the bund prices gained following the United States debt market, which bolstered by a weaker than expected ISM non-manufacturing reading that came in around 51.4, its lowest level since January 2010.

The August ISM estimate of United States national non-manufacturing conditions revealed downward pressure in the composite index reading to 51.4 (lowest since January 2010), versus the unrevised 55.5 reading that occurred in July. This comes in below market expectations for a 55.0 result.

Hence, we see this result as likely to provide enough weight to support the Fed leaving rates unchanged at the September FOMC meeting.

On Tuesday, the third reading of the second-quarter Eurozone GDP growth estimate is reaffirmed once again at 0.3 percent q/q, same as its first two estimates and identical to what was predicted by the market consensus and proving that the downward revision to Finland's second-quarter GDP growth rate to zero q/q from 0.3 percent previously recorded was too small to have any effect.

The annual rate is also unchanged, at 1.6 percent y/y, and we continue to expect a shift down in gear in average quarterly GDP growth in the second half of 2016 from an average 0.4 percent per quarter in the first half, to an average 0.25 percent to 0.3 percent per quarter in the second half.

Meanwhile, the pan-European STOXX 600 index was up 0.11 percent and the euro-area blue-chip gauge, the PSI20 Index rose 0.03 percent, the STOXX 50 climbed 0.31 percent. The DAX trading 0.21 percent higher and the CAC-40 jumped 0.07 percent by 09:50 GMT.