Lower-rated euro bond yields dip; eyes on Greece, US payrolls

Yields on lower-rated eurozone bonds fell on Friday as a selloff in Greek markets eased after the European Central Bank let the country’s central bank offer its banks enough emergency funds to stem a major outflow.

The ECB allowed the Greek central bank on Thursday to offer the country’s banks emergency funding of up to 60 billion euros, having earlier said it would stop accepting Greek bonds in return for funding.

This eased a selloff in the country’s assets though many in the market remained uneasy over the tense negotiations between Greece and European Union lenders over a new debt deal.

Investors were also focusing on the US January payrolls report which is widely forecast to show the world’s biggest economy created fewer jobs in January than in December.

Spanish and Italian 10-year yields were 2-3 basis points down at 1.45 percent and 1.53 percent respectively.

The ructions in Greek markets have seen yields on bonds issued by the euro zone’s weaker economies bounce off record lows hit after the ECB announced its quantitative easing program two weeks ago.

“There’s somewhat of a pause in the Greek/EU shenanigans … That may allow the peripherals to rally a bit. We’re also more likely to see attention shift to the US payrolls today,» said Orlando Green, a strategist at Credit Agricole.

Greek 10-year yields were unchanged on the day at 9.96 percent, having risen over 11 percent earlier this week, while three- and five-year yields were flat at 17 percent and 13 percent respectively.

Greek Prime Minister Alexis Tsipras and his finance minister, Yanis Varoufakis, have been crisscrossing Europe to seek support from partners for their plan to win debt relief and end austerity policies. But they have so far received little other than warnings to avoid reneging on commitments under the country’s existing bailout program.

Analysts expect Greek markets to stay volatile until a deal is struck.

Among higher-rated euro zone bonds, German 10-year yields, the benchmark for euro zone borrowing costs, were 1 basis point lower at 0.36 percent.

Economists polled by Reuters expected US employers to have taken on 234,000 workers in January, below December’s increase of 252,000. A possible rebound in wage growth, however, will likely revive views that the Federal Reserve might consider raising interest rates as early as this summer, analysts and traders said. [Reuters]