Tradeweb Government Bond Update - August 2021

Ten-year government bond yields rose across the board in August, with those for Greece leading the pack. After closing at a Euro-era record low of 0.53% on August 5, the Greek 10-year benchmark yield climbed 15.6 basis points to end the month at 0.75%. Finance Minister Christos Staikouras reiterated that estimates of a 3.6% economic growth were realistic, feasible and probably conservative, stating the country would withstand the pandemic and wildfires.

The UK’s 10-year Gilt saw the second largest yield increase during the month, finishing 15.5 basis points higher at 0.72%. Data from the Office of National Statistics revealed that the country’s economy had expanded by 1% in June, bringing second quarter GDP growth to 4.8%. The Bank of England, which predicted that UK GDP will reach its pre-pandemic level in Q4 2021, left interest rates unchanged and said that inflation could rise as high as 4% in the fourth quarter, before falling back to its 2% target.

In Spain and Italy, 10-year bond mid-yields increased by 14 and 8 basis points to close at 0.34% and 0.71%, respectively. According to Eurostat data released in mid-August, the countries’ economies had expanded by 2.8% and 2.7% in the second quarter of 2021, beating the Eurozone growth average of 2% and Germany’s GDP of 1.5%. The Ifo Business Climate indicator for Germany fell to 99.4 in August, down from 100.8 in July. The yield on the 10-year Bund rose by over 7 basis points to end the month at -0.39%.

Across the Atlantic, the U.S. 10-year Treasury yield finished August 6 basis points higher at 1.30%. Fed officials continued to discuss the possibility of tapering beginning this year. In his virtual Jackson Hole speech, Fed Chair Jerome Powell said the process could indeed start in 2021, however this should not be interpreted as a signal for rate increases. In a month of mixed economic data, the U.S. economy added 235,000 jobs in August, the fewest since January and well below forecasts of 750,000, while the unemployment rate declined to 5.2%.