European bonds slip on first day of 2018 trading

Bloomberg

European bonds slipped on the first day of 2018 trading, led by longer-dated securities after European Central Bank policy maker Benoit Coeure said its current extension of stimulus
may be the last.
German 30-year bunds led the drop in the euro-area’s debt, followed by the Netherlands and France, while UK gilts also slid. Coeure said that given the region’s economy, there is a “reasonable chance” that the extension of its asset-purchase pro- gram decided in October could be the final one, unless inflation disappoints on the downside, in
an interview with Caixin Global published. Adding to the pressure on bunds, German consumer prices rose by more than
expected in December.
“The bearish price action in bunds is down to the combination of German inflation and Coeure, giving rise to a re-pricing of QE and rate expectations,” said Commerzbank AG strategist Christoph Rieger.
The bank suggests tactical shorts in German 10-year bonds looking for yields to touch 0.5 percent for the first time since October.
German 10-year yields gained three basis points to 0.46 percent as of 9:15 a.m. in London.
Those on 30-year debt rose five basis points to 1.31 percent, the highest since November 14.
French 10-year yields added three basis points to as much as 0.82 percent, while UK 10-year gilt yields climbed six basis points to 1.25 percent.
Money markets are now pricing the ECB’s first interest-rate hike since 2011 early next year, with focus in the coming months on whether the central bank changes its forward guidance on any increase to borrowing costs. It resumed bond-buying on Tuesday, albeit at a slower pace of 30 billion euros ($36 billion) per month until September, down from 60 billion euros per month last year.