Market Analysis

Euro zone government bond yields edged up in calmer trading on Wednesday after a global equity rout earlier in the week subsided. Despite the increase, benchmark yields remained near their lowest levels for the year.

The bond market volatility index (.MOVE) reached its highest level since the start of the year, highlighting this week's market turbulence.

German 10-year Bund yields (DE10YT=RR), the euro zone's benchmark, rose by 3.6 basis points to 2.22%. Meanwhile, yields on the two-year Schatz (DE2YT=RR), which are more sensitive to rate expectations, increased by 4 basis points to 2.405%. Both yields remained close to their lowest levels since January.

"With the data calendar empty, Bunds and spreads will likely remain highly influenced by equity markets or the Japanese yen," said Hauke Siemssen, a rates strategist at Commerzbank.

Italian 10-year yields (IT10YT=RR), often seen as a proxy for the euro zone's more indebted nations, rose by 2 basis points to 3.676%, widening the premium over German Bunds (DE10IT10=RR) by 1.3 basis points to 144.5 basis points.

Two-year euro zone swap spreads, which can indicate investor risk aversion, tightened for a third consecutive day to around 32 basis points, their narrowest since August 1. The spread had widened to its broadest since mid-June on Friday as the equity selloff intensified.

Paraphrasing text from "Reuters" all rights reserved by the original author.