UPDATE 10-year German bond yields fall 5-week low, PMI strong gas falls

* Euro zone govt band yield margin tmsnrt.rs/2ii2Bqr (Updates throughout, add card, PMI data)

LONDON, March 24 (Reuters) – Germany’s 10-year bond yield fell to a five-week low on Wednesday, a sign of dissatisfaction that tighter restrictions for a new wave of COVID-19 could hurt the eurozone economy.

Still, the PMI flashed IHS Markit flash, an economic indicator with a sharp eye, above the 50 mark separating growth from shortening to 52.5 in March compared to 48.8 in February, the highest level since the end of 2018.

The news affected the rally in bond markets but yields remained lower and prices higher, as a note of caution issued.

Much of Europe is suffering from the third wave of coronavirus diseases and renewed lock-in measures, as well as the slow spread of vaccines, meaning the final reading of the study and April numbers could be more disturbing.

The latest headlines from major eurozone economies such as Germany, which extended its lock to April 18, have prompted a return to safe-haven bonds. European stocks fell Wednesday to a two-week low.

Building signals in the pace of European Central Bank bond buying have also supported bond markets.

“While it may be difficult for Bund’s results to break below the current range, the refocusing on the face of a domestic pandemic against a backdrop of increased ECB buying – even if only moderately high – contribute to keeping yields lower for now, ”said Benjamin Schroeder, senior rates expert at ING.

German 10-year Bund yield fell to -0.375%, the lowest level in five weeks. It was finally down 2 bps on the day at -0.36%; nearly 7 bps lower so far this week.

Most 10-year euro bond yields were down 1-2 bps on the day.

This week’s fall in yields is in contrast to a sharp rise in the past few weeks, driven by the prospect of a strong U.S.-led economic recovery and a rise in inflation.

Sarang Kulkarni, an asset manager at London-based revenue group Vanguard, said markets had begun to wonder what the world would look like as economies normalized – a topic that tended to change. will play out over the next 24 to 36 months.

Kulkarni said a key focus for sovereign and corporate bond markets would be, especially once fiscal stimulus begins, when central banks begin to remove stimulus.

“It has always been argued that central bank support is needed to replace it with fiscal support. And now that comes in and we have the EU recovery fund later in the year, ”he said.

“When do they (central banks) start to step away? I don’t think they’ll be in a hurry to take away motivation, but that’s the big question on everyone’s mind. ”

Narrated by Dara Ranasinghe Edited by Gareth Jones, William Maclean

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