(Correct the size of the weekly drop in paragraph 5, correct the headline and lead to say the fourth weekly drop, not the second)
* Eurozone Periphery Government Bond Yields tmsnrt.rs/2ii2Bqr
July 23 (Reuters) – The yield on Germany’s 10-year bond, the benchmark for the eurozone, fell for the fourth week in a row as fears over the spread of the Delta variant of the coronavirus rocked markets and prompted investors to buy more secure assets.
Financial markets were volatile earlier in the week as sentiment on the global economic outlook shifted with each new Delta title, although the prevailing mood improved on Friday night.
Eurozone bond yields ended the day broadly flat after a moderate reaction to the IHS Markit Flash Purchasing Managers Index (PMI), which showed Eurozone business activity increased at its fastest monthly pace in more than two decades in July.
Input prices, which are closely watched given the focus on inflation, remained stable from June highs, but a composite reading of future output fell to its lowest since February, reflecting a drop in confidence given the spread of the Delta variant.
At 3:47 p.m. GMT, the 10-year yield of Germany, the region’s benchmark, was down about one basis point on the day to -0.419%, and down about 7 basis points on the day. week. It hit its lowest since February earlier this week at -0.44%.
Meanwhile, the Italian 10-year bond yield remained stable at 0.628%. The closely watched spread to equivalent German yield was 104bp, narrowing from yesterday’s high of 108bp.
“Developments in the broader context of the pandemic will likely remain at the forefront of investor concerns,” UniCredit analysts said.
The European Central Bank on Thursday pledged to keep interest rates at record highs for even longer to boost the bloc’s sluggish price growth, at its first meeting since adopting a symmetrical inflation target 2% following its strategy review earlier in July.
Mizuho analysts said the new approach carries a much lower risk that the ECB will make a mistake and tighten policy at the wrong time, expecting this to lead to lower rate volatility.
ECB President Christine Lagarde said the bank would not raise interest rates until it saw inflation hit the midpoint target of its projection horizon.
Three sources also told Reuters that the ECB does not plan to decide the future of its emergency bond purchase program in September, as there would still be uncertainty about the path of the pandemic at this point. . (Reporting by Yoruk Bahceli; Editing by Kirsten Donovan)