By Stefano Rebaudo
September 19 (Reuters) – Investors turned cautious after the yield on the euro zone’s benchmark 10-year Bund rose to its highest level in more than 12 years, with European Central Bank officials reiterating that rates would remain at current levels for an extended period to control inflation.
François, the centrist decision-maker of the ECB Villeroy de Galhau said the ECB would keep rates at 4% for as long as necessary after a certain policy hawks They recently called for rates to stay at high levels for longer, without ruling out a further rise.
Money markets continue to price in a roughly 30% chance of another ECB rate hike by the end of the year. EURESTECBM2X3=ICAP
“Investors are in no hurry to grow their cash,” said Christoph Rieger, head of rates research at Commerzbank.
“While most seem to agree that interest rates are at an all-time high, there is no urgency to lock in lower rates further down the curve,” he added. .
Bund yields DE10YT=RR were down one basis point (bps) to 2.70% on Tuesday. At the beginning of March they reached their highest level since the summer of 2011 at 2.77%.
“Overall, it looks like the recent sell-off (in the Bund) may be running out of steam,” Citi analysts said after explaining that the Bund had hit technical support.
Markets are also awaiting the outcome of the Federal Reserve’s policy meeting Wednesday evening, with a poll of academic economists expecting the U.S. central bank to defy market forecasts and raise rates by 25 basis points ( pdb).
Rising oil prices have raised fears of a slowdown in the disinflation process, at least in the short term, adding downward pressure on bond prices, which move inversely to yields.
Oil price climbed Tuesday for the fourth straight session as low U.S. shale production sparked new concerns about a supply shortfall resulting from prolonged production cuts by Saudi Arabia and Russia.
Yield on Italian 10-year bonds IT10YT=RR — the benchmark for the euro zone periphery — fell one basis point to 4.50%.
The spread between Italian and German 10-year bond yields – an indicator of investor confidence in the euro zone’s most indebted countries – was at 179 basis points after hitting a new 3-month high and half to 180.90 basis points on Monday.
ECB policy hawks have reiterated that the central bank must end reinvestments of bonds purchased under the €1.7 trillion (€1.82 trillion) Pandemic Emergency Purchase Program (PEPP). dollars) before the current deadline of the end of 2024.
Such a move could hurt peripheral bond prices, as the ECB can flexibly use PEPP reinvestments to avoid excessive widening of yield spreads, which could hamper monetary policy transmission.
(Reporting by Stefano Rebaudo, editing by Bernadette Baum)
(([email protected];))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
By Stefano Rebaudo
September 19 (Reuters) – Investors turned cautious after the yield on the euro zone’s benchmark 10-year Bund rose to its highest level in more than 12 years, with European Central Bank officials reiterating that rates would remain at current levels for an extended period to control inflation.
François, the centrist decision-maker of the ECB Villeroy de Galhau said the ECB would keep rates at 4% for as long as necessary after a certain policy hawks They recently called for rates to stay at high levels for longer, without ruling out a further rise.
Money markets continue to price in a roughly 30% chance of another ECB rate hike by the end of the year. EURESTECBM2X3=ICAP
“Investors are in no hurry to grow their cash,” said Christoph Rieger, head of rates research at Commerzbank.
“While most seem to agree that interest rates are at an all-time high, there is no urgency to lock in lower rates further down the curve,” he added. .
Bund yields DE10YT=RR were down one basis point (bps) to 2.70% on Tuesday. At the beginning of March they reached their highest level since the summer of 2011 at 2.77%.
“Overall, it looks like the recent sell-off (in the Bund) may be running out of steam,” Citi analysts said after explaining that the Bund had hit technical support.
Markets are also awaiting the outcome of the Federal Reserve’s policy meeting Wednesday evening, with a poll of academic economists expecting the U.S. central bank to defy market forecasts and raise rates by 25 basis points ( pdb).
Rising oil prices have raised fears of a slowdown in the disinflation process, at least in the short term, adding downward pressure on bond prices, which move inversely to yields.
Oil price climbed Tuesday for the fourth straight session as low U.S. shale production sparked new concerns about a supply shortfall resulting from prolonged production cuts by Saudi Arabia and Russia.
Yield on Italian 10-year bonds IT10YT=RR — the benchmark for the euro zone periphery — fell one basis point to 4.50%.
The spread between Italian and German 10-year bond yields – an indicator of investor confidence in the euro zone’s most indebted countries – was at 179 basis points after hitting a new 3-month high and half to 180.90 basis points on Monday.
ECB policy hawks have reiterated that the central bank must end reinvestments of bonds purchased under the €1.7 trillion (€1.82 trillion) Pandemic Emergency Purchase Program (PEPP). dollars) before the current deadline of the end of 2024.
Such a move could hurt peripheral bond prices, as the ECB can flexibly use PEPP reinvestments to avoid excessive widening of yield spreads, which could hamper monetary policy transmission.
(Reporting by Stefano Rebaudo, editing by Bernadette Baum)
(([email protected];))
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
