German yields bounce off record low after Draghi says recession risk is 'pretty low'

Mario Draghi, President of the European Central Bank (ECB), speaks during a news conference to discuss monetary policy in Tallinn, Estonia, on Thursday, June 8, 2017.
Peti Kollanyi | Bloomberg | Getty Images

Yields around the globe bounced from lows after European Central Bank President Mario Draghi promised monetary support for what the central bank sees as slowing growth in Europe but still a "pretty low" chance of a recession.

German yields fell to record lows under 0% early Thursday morning after Draghi said at a press conference that "a significant degree of monetary stimulus continues to be necessary to ensure that financial conditions remain very favorable and support the euro area expansion."

His first comments helped push the yield on the benchmark German 10-year bund hit a new record low of -0.412%. It also kept pressure on U.S. rates, with the yield on the benchmark 10-year Treasury note falling to around 2.02%.

Later, however, rates snapped higher after the ECB leader suggested that some members of the central bank weren't convinced on certain aspects of a possible stimulus package. Draghi said that the risk of a recession in the region was "pretty low," giving a more mixed message than the earlier statement.

Those comments were enough to curb and reverse Treasury buying as some investors took the ECB's rhetoric to mean that the U.S. Federal Reserve may not as dovish as expected when it announces its monetary decision next week. The 10-year Treasury yield was last seen up at 2.071%.

"Draghi made a lot of promises but he didn't do anything actually," said Ward McCarthy, chief financial economist at Jefferies. "He came out of the starting gate fast but the follow through did not deliver on those expectations."

"There was an expectation that the ECB was ready to move sooner," he added. "This had knock-on effects for expectations for the Fed next week. The thinking is maybe those that were expecting a 50 basis point cut should downgrade those expectations."

— CNBC's Patti Domm contributed reporting.