Euro zone bond yields have seen a decrease as oil anxiety continue to prevail following last weekend attack on Saudi oil facilities. The attack led to geopolitical uncertainty which in turn offered a cautious tone in the Euro bond markets prior to the expected United States rate decrease on this Wednesday.
The Attack Outcome
On top of geopolitical uncertainty, the attack also cut off 5% of the global crude output resulting in a decrease in the supply of oil in the global market. As a result, the attack led to the biggest ever witnessed a surge of the oil price since 1991 which sent investors seeking alternatives and as a result, they flock to safe-haven assets.
The Effects of the Attack on Bonds
With the attack being topped by uncertainty and around Brexit, it led to a reverse on the sell-off in the Euro zone bonds from an increase to a decrease. Initially, and six weeks ago, the Euro zone government bond had its yields selling high up to last week. However, with the risks associating to the attack remaining on the table, the euro government bonds edged lower this week on Tuesday.
Any Better Deal Ahead?
Even with that, there have been great efforts from various individuals such as British Prime Minister Boris Johnson and the Federal Reserve at correcting the situation. According to Boris Johnson, there is a Brexit deal on the way come Monday which will last for two days and will mainly discuss solutions to the oil markets development and risk sentiments.
As a result of the deal, it is expected that the Federal Reserve could cut the current rates by 25 points before it concludes the two-day meeting deal on Wednesday. Hopefully, this move could help resolve the current situation where core government bond yields continue to edge down.