Bond managers buy into Europe as ECB cuts rates to tackle deflation

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Bond managers are buying back into European government debt, as worrying inflation figures revive fears the eurozone could sink into a period of Japan-style deflation.

Eurozone CPI inflation for October came in at 0.7%, far lower than both analysts’ expectations and September’s figure of 1.1%. Figures in a number of peripheral countries were lower still, with Greece already in deflation and Spain’s inflation rate falling to 0.1%. The Europe-wide reading – the lowest level since the financial crisis – forced the European Central Bank to cut interest rates from 0.5% to 0.25% on Thursday, sending the euro tumbling two cents against the dollar from $1.352 to $1.337, a seven-week low. Eurozone debt rallied across the board, with peripheral ten-year yi...

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