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

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...