April 25, 2024

Eurozone Yield Soars Ahead Of ECB Minutes Release 

Thursday saw government bond yield for Euro zones revert to September’s intra-year highs. The gain followed a reveal that ECB would release the minutes of September’s policy meeting. The report contains hints about the bank’s potential tightening decision. 

Speculations On September’s Policy Meeting 

ECB raised rates by 75 basis points at its last three policy meetings. Then waved possibilities of further hikes in the future. With inflation haywire, ECB resolves to restore it to its target of 2 percent. 

Right now, investors are awaiting the bank to unveil the minutes of September’s meeting. Consequently, they would examine it for details regarding potential rate figures. Also, they seek to know if there would be changes to the bank’s books. 

Daniel Lenz, a strategist at DZ bank, shared with interviewers what investors want to know. He said they are interested in the consensual motives of policymakers. And also their decision on potential rates raise.

He added that there is a chance European central bankers saw from the same viewpoint. Therefore, the subsequent points for rates at October’s meeting have already been agreed upon. October 27 is the date for the next policy meeting. 

Refinitiv’s data showed that analysts are calling a jumbo point for October’s meeting. According to them, the ECB would lift rates by 75 basis points. Furthermore, they should hit 125 basis points by the end of 2022. 

Germany’s ten-year government yield climbed three basis points by 11:45 GMT Thursday. Estimation in percentage revealed a 2.053 percent height. Meanwhile, last week Wednesday saw it touch an eleven-year high of 2.352 percent.

Italy’s Bond Yield

Italy also recorded a boost in its yield by 4.467 percent, equivalent to 2 basis points. It went up 27 basis points on Wednesday. That was its highest daily point since March 2020.

The increase in bond yield followed ECB’s summer intervention wearing off. Bond yields react oppositely to price. When the currency market rallies, it falls, and vice versa. 

ECB declared a massive decline in its Italian bond reserve from August through September. It lost €1.24 billion in value then. The bond is an offshoot of its Pandemic Emergency Purchase Program. 

Two months ago, the bond had realized €9.76 billion in profits. That was after the ECB stated the purpose of PEPP. It said it was to restrict bond yield from surging rapidly in underdeveloped countries.

Hauke Siemssen said ECB did not buy any more bonds after its initial purchase. He added that the positive explanation of BTPs is that spread levels would stand firm. ECB does not have to interfere with it regardless of bonds rising.

The gap between Germany and Italy’s bond yield jumped from 2 to 241 basis points. Thursday recorded the highest distance between their ten-year notes. 

Europe’s measurement of long-term inflation attained 2.2046 percent. Meanwhile, on Monday, it dived to its lowest range of 2.0586 percent since August.

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