Euro zone bond yields rise after ECB's Villeroy euro comments

BY Reuters | ECONOMIC | 05/16/22 04:07 AM EDT

LONDON, May 16 (Reuters) - Euro zone government bond yields rose on Monday, reversing early falls, after European Central Bank policymaker Francois Villeroy de Galhau said a weak euro threatened price stability in the currency bloc.

The euro's weakness on currency markets could threaten the ECB's efforts to steer inflation towards its target, Villeroy said.

The comments triggered a rise in bond yields with German Bund yields last up 3 basis points on the day at 0.98% . They had been 2 bps lower in earlier trading. Italian 10-year bond yields gained 6 bps to 2.91%. (Reporting by Dhara Ranasinghe Editing by Tommy Wilkes)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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