Euro zone bond yields rise after ECB delivers ‘hawkish’ cut

[Pelican Press 0]

Euro zone bond yields rise after ECB delivers ‘hawkish’ cut

A man shelters from the rain under an umbrella as he walks past the Euro currency sign in front of the former ********* Central Bank (ECB) building in Frankfurt am Main, western Germany.

Kirill Kudryavtsev | Afp | Getty Images

Euro zone government bond yields extended gains Thursday afternoon, shortly after the ********* Central Bank announced its first interest rate cut in five years.

Germany’s 10-year bond yield, seen as the euro area benchmark, was up 6 basis points to 2.557% at 3:12 p.m. London time. The country’s 2-year bond yield was higher by 4 basis points to 3.025%.

Italy’s 10-year bond yield was up 7 basis points to 3.88%, while the yield of the Spanish bond of the same maturity added 6 basis points to 3.29%.

While the ECB delivered a first rate since 2019, market watchers were quick to speak of uncertainty over what happens next.

“The Governing Council emphasized a data-dependent, meeting-by-meeting approach, reducing the likelihood of a back-to-back rate cut in July due to insufficient ********* data before the next meeting. This decision can be termed a ‘hawkish cut,'” Gaël Fichan, head of fixed income at Bank Syz, said in a note.

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Stateside, U.S. Treasurys were higher as investors monitored a rise in weekly jobless claims — potentially supportive of Federal Reserve rate cuts — with the benchmark 10-year edging slightly higher to 4.299%.

Interest rate divergence is likely to drive action in stocks, currencies and bonds in the coming months, according to analysts.

“The euro zone economy is in a different place than the US, which is subject to a resurgence in inflation and a ******* fiscal stance. The cost-of-living crisis left a larger dent on household real incomes in Europe, whereas in the U.S. domestic demand is strong,” Yael Selfin, chief economist at KPMG, said in a note.

“In addition, a tighter policy by the U.S. Federal Reserve could provide additional tightening in global financial conditions including via boosting long-term ********* bond yields, potentially warranting a greater policy offset at the short end of the curve.”

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Central banking,Inflation,U.S. 10 Year Treasury,Breaking News: Markets,Markets,World economy,Bonds,business news
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