Eurozone debt sells off on mounting ECB rate rise expectations

The cost of short-term government lending in the eurozone rose to a record eight-year high on Thursday after central bank officials said they could raise interest rates as early as July.

The yield on Germany’s two-year bond – an index for the entire euro area that closely monitors expectations of the European Central Bank’s interest rate path – climbed 0.13 percentage points to 0.18%, the highest level since 2014. This is later. Cut some of these gains to trade at 0.13 percent. Bonds with longer dates were also hit, with Germany’s 10-year yield adding 0.03 percentage points to 0.89% in afternoon trading.

The moves came after ECB Vice President Luis de Gindus said in an interview with Bloomberg that the central bank’s first rate hike since 2011 could come as early as July. His colleague Pierre Wensch said in a separate Bloomberg interview that the ECB could raise interest rates above zero before the end of 2022, ending an eight-year low below zero in the eurozone.

The change in media has shaken markets that by the beginning of the year expected the ECB to move more slowly in tightening monetary policy than its counterparts in the UK and US.

“Four months ago, [Christine] Lagard said it is very unlikely they will raise interest rates in 2022 and now we have. . . Governors are talking about raising interest rates in July, “said Bastian Drott, chief macroeconomic strategist at CPR Asset Management.” Everything has changed, “he added.

Derivatives markets are priced back to zero for the ECB’s deposit rate until October, from the current level of minus 0.5%.

ECB President Lagard will attend a IMF panel on the global economy later on Thursday alongside Federal Reserve Chairman Jay Powell. Powell and Garda are due to deliver separate speeches on Thursday and Friday respectively.

Central bankers in Europe and the US have adopted a more hawkish stance as inflation rates have been rising for decades, struggling to keep up with expectations of price growth. Years, climbed on Thursday to 2.44%, the highest in a decade.

The rise in the Bund’s yield, which is seen as ringing bells for the eurozone’s recruitment costs, came as German exports fell 7.2% in March, according to the National Statistical Office Destatis, in the first such economic data set reflecting the impact of sanctions against Russia.

In the UK, short-term government bonds have come under similar pressure, with the two-year currency yield having peaked since 2009, at 1.63%.

In the stock markets, the regional stock index of the Stoxx 600 in Europe rose by 0.8%. The German DAX rose 1.5%, while London’s FTSE 100 rose 0.2%. France’s CAC 40 added 1.8 percent following a A combat debate on television Days before the final vote of the country’s presidential election.

Hedge funds helped push stocks up earlier this week as they sought to release negative gambling. They were buying net stocks in North America on Tuesday, according to a note sent to customers by Morgan Stanley’s brokerage unit.

Futures that follow Wall Street’s S&P 500 added 0.9% on Thursday, with Nasdaq 100 up 1.3%.

Another report by Lawrence Fletcher

Eurozone debt sells off on mounting ECB rate rise expectations Source link Eurozone debt sells off on mounting ECB rate rise expectations

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