Euro zone government bond yields fell sharply on Tuesday, as expectations for a massive interest rate raise by the European Central Bank this week eased following media reports that policymakers are considering a smaller hike.
After initially rising, by 1030 GMT yields were down sharply across the bloc. German yields were down between 6 and 20 basis points
Other yields were down between 5 and 10 basis points, with several hitting their lowest since late August .
Jan von Gerich, an analyst at Nordea, said media reports, including one that pointed to ECB policymakers debating a 60 basis point move instead of 75 bps, were behind the drop in yields, although he wasn’t persuaded by them.
“The market had decided clearly it was going to be 75 basis points but it is more open based on these reports,” he said.
“I don’t think it’s been planted by the ECB to talk the market down. I still think that the hawks are in control and they will deliver 75 basis points,” he added, noting that before a blackout period ended ECB policymakers had plenty of chances to push back on rising expectations for a supersized hike.
Money markets are now pricing in a 67% chance of a 75 bps rate hike, down from almost 90% earlier on Tuesday.
Markets also anticipate a further hike worth at least 50 bps at the ECB’s October meeting as investors position for front-loaded rate increases before the economic outlook deteriorates further due to the energy shock.
Bond yields have been very volatile in recent weeks. They had jumped on Monday, led by a rise in the Italian 10-yield towards 4%, after Russia’s decision to keep its main gas pipeline to Germany shut exacerbated inflation and ECB rate-hike fears.
In Tuesday trade, the Italian 10-year yield was down 10 bps higher at 3.85% .
In a busy day for government bond sales, Italy’s Treasury started marketing a new green government bond via a syndicate of banks on Tuesday, in a deal closely watched by the market against a backdrop of a looming snap election and new ECB tightening.
France started the sale of a 20-year syndicated bond and has seen 23 billion euros of demand, according to a lead manager memo seen by Reuters.
U.S. markets reopen after Monday’s public holiday, with a rise in U.S. Treasury yields pushing higher in London trade.
Rewritten Content:
Euro zone authorities bond yields fell sharply on Tuesday, as expectancies for a massive hobby price increase by using the eu vital bank this week eased following media reports that policymakers are thinking about a smaller hike.
After to begin with rising, via 1030 GMT yields were down sharply throughout the bloc. German yields had been down among 6 and 20 foundation points
different yields had been down among 5 and 10 basis factors, with numerous hitting their lowest on account that past due August <.
Jan von Gerich, an analyst at Nordea, stated media reviews, inclusive of one that pointed to ECB policymakers debating a 60 basis factor flow rather than seventy five bps, had been in the back of the drop in yields, despite the fact that he wasn’t persuaded through them.
“The marketplace had determined definitely it changed into going to be seventy five basis factors but it’s miles extra open based on these reviews,” he said.
“I don’t suppose it’s been planted by using the ECB to speak the marketplace down. I nevertheless suppose that the hawks are on top of things and they may supply seventy five basis points,” he delivered, noting that earlier than a blackout length ended ECB policymakers had plenty of chances to ward off on growing expectations for a supersized hike.
cash markets are now pricing in a 67% threat of a 75 bps rate hike, down from almost 90% earlier on Tuesday.
Markets also count on a similarly hike well worth at least 50 bps at the ECB’s October assembly as traders position for front-loaded fee increases before the financial outlook deteriorates further because of the strength surprise.
Bond yields have been very unstable in latest weeks. they’d jumped on Monday, led with the aid of a upward push within the Italian 10-yield closer to four%, after Russia’s decision to keep its principal fuel pipeline to Germany shut exacerbated inflation and ECB price-hike fears.
In Tuesday alternate, the Italian 10-year yield became down 10 bps better at three.eighty five% .
In a hectic day for government bond income, Italy’s Treasury began advertising a brand new green authorities bond through a syndicate of banks on Tuesday, in a deal intently watched by means of the market in opposition to a backdrop of a looming snap election and new ECB tightening.
France commenced the sale of a 20-year syndicated bond and has seen 23 billion euros of demand, in step with a lead manager memo seen by using Reuters.
U.S. markets reopen after Monday’s public vacation, with a rise in U.S. Treasury yields pushing better in London change.
