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Eurozone M3 Growth Slows in April

Growth in loans to non-financial corporations rose slightly to 2.4% from 2.3% .Growth in loans to non-financial corporations rose slightly to 2.4% from 2.3% .

Eurozone money supply and credit to private sector grew at slower pace in April, the European Central Bank reported Monday. The broad monetary aggregate M3 climbed 4.9% annually, slower than the 5.3% increase in March. The annual rate was forecast to moderate to 5.2%.

Meanwhile, annual growth of M1 which includes currency in circulation and overnight deposits, improved slightly to 9.2% from 9.1% in the previous month, RTTNews reported.

Data showed that total credit to euroarea residents grew at slower pace of 4.6% after rising 4.9% in March. Credit to the private sector climbed 2.9% but weaker than March’s 3.1% increase. Loans to households grew at a steady pace of 2.4% in April.

At the same time, growth in loans to non-financial corporations rose slightly to 2.4% from 2.3%.

  Lower-Rated Bonds Suffer

Lower-rated southern European government bond prices fell on Monday after German Chancellor Angela Merkel warned of worsening relations between Europe and some of its allies, in particular the United States and Britain, Reuters reported.

Merkel said on Sunday that Europe could no longer completely rely on some nations, pointing to bruising meetings of the G7 wealthy nations and NATO last week.

Concerns over trade among developed markets have increased over the past year after the UK voted to leave the European Union last June and Republican Donald Trump became US president in November, partly on a protectionist agenda.

These issues resurfaced at a two-day summit of the G7 group of some of the world’s largest economies. “Merkel’s comments point to political woes. It is something which investors have to digest,” said DZ Bank strategist Daniel Lenz.

“It is a slightly risk-off mode this morning but again it is thin trading today so you could see this change very quickly,” he said, referring to the fact that US and British investors are on holiday.

Italian, Spanish and Portuguese government bond yields rose 3-5 basis points on Monday morning, underperforming other countries in the bloc. The German equivalent, on the other hand, was largely unchanged; a combination that often points to a “risk off” or a nervous mood in the market.

The spread between German and US 10-year borrowing costs was at 191.5 bps, close to a two-week high of 192 basis points hit on Friday on increased concerns over the world’s largest economy. “The main reason for that is there are concerns about whether Trump will push forward with his spending and tax plans, with all these investigations going on,” said Lenz.

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