By Harry Robertson
LONDON (Reuters) – A rapid divergence between euro zone and U.S. government bond markets is expected to continue, as an increasingly lacklustre European economy adds to the pressure on the European Central Bank to quickly cut interest rates.
The closely-watched gap between U.S. and German yields has risen to its widest since July at around 183 basis points (bps), as U.S. yields have climbed in recent weeks while the German ones have ticked up only slightly. Yields move inversely to prices.
“We think these market dynamics have further to run,” said Simon Blundell, co-head of European fundamental fixed income at $11.5 trillion asset manager BlackRock (NYSE:), who favours European over U.S. bonds.
While September’s sharp acceleration in U.S. jobs growth highlights the strength of the U.S. economy, euro area business activity contracted unexpectedly last month.
Traders now expect the U.S. Federal Reserve to slow…
