* Eurozone Periphery Government Bond Yields tmsnrt.rs/2ii2Bqr (updates prices, adds US Treasuries)
AMSTERDAM / LONDON, April 8 (Reuters) – Eurozone bond yields plunged into uncertainty over the bloc’s COVID-19 vaccination program on Thursday, while the report of the European Central Bank’s March meeting has shown that policymakers are prepared to reduce bond purchases if conditions allow.
Pressure also came from Treasury yields which fell following worse-than-expected US employment data, while the Federal Reserve’s dovish minutes released on Wednesday showed the central bank was not rush to raise interest rates.
By late afternoon, Eurozone safe-haven bond yields fell as the German 10-year rate, the benchmark for the bloc, lost around 1.2 basis points to -0.33%.
Italian 10-year bond yields fell 3 basis points to 0.67%, keeping the closely watched risk premium with Bunds at around 100 basis points, but below the four-week high it set. reached Wednesday.
The March ECB meeting minutes released on Thursday showed policymakers debated a smaller increase in bond purchases and agreed to proceed with the upstream purchase this quarter on condition that it can be reduced later if conditions permit.
Monthly bond purchases under the ECB’s € 1.85 trillion Pandemic Emergency Purchase Program (PEPP) jumped more than a fifth last month, enough to stabilize nominal bond yields and reduce inflation-adjusted yields to their lows of the beginning of the year.
The central bank has stepped up its sovereign bond purchases after a surge in yields on U.S. Treasuries pushed up borrowing costs in the bloc and threatened Europe’s attempt to recover.
Sources told Reuters at the time that hawkish policymakers were skeptical of increased buying and some saw rising nominal bond yields as a potentially welcome sign of economic recovery.
Repeating the bank’s overall forecast, ECB President Christine Lagarde said on Thursday that the € 1.85 trillion set aside may not need to be spent in full but could also be increased depending on market conditions. market.
Lagarde also said that while the resurgence of the pandemic weighs on euro area growth in the coming months, the recovery is likely to resume once lockdowns are lifted.
Lagarde’s comments came as data showed euro area producer prices were rising at an accelerating year-over-year rate in February as the cost of energy and intermediate goods rose, underscoring expectations of faster growth in consumer prices in the coming months.
Eurozone consumer inflation jumped in March to 1.3%, reaching another milestone in what will likely be a temporary but sharp rise that could put consumer price growth above the the European Central Bank’s target of almost 2% later this year.
The ECB predicted the push, warning that inflation could even exceed its target by the end of the year, but vowed to look beyond what it expects to be a temporary increase in its political decisions.
Concerns over the deployment of COVID-19 vaccines and its consequences for the European economy grew after European regulators discovered a potential link between AstraZeneca’s vaccine and reports of rare brain blood clots.
The vaccine flip side, a key part of the bloc’s vaccination efforts, comes as the euro zone grapples with a new wave of the virus. Spanish regions tightened lockdowns on Wednesday and the German Chancellor backed a tighter lockdown. (Reporting by Yoruk Bahceli and Julien Ponthus; editing by John Stonestreet, Larry King and Andrew Heavens)