LONDON: The euro and government bond yields in the currency area dipped on Tuesday after Reuters reported that the ECB may keep the option open to prolong its asset-purchase scheme again in 2018.
European Central Bank policymakers disagree on whether to set a definitive end-date for their money-printing programme when they meet in October, raising the chance that they will keep open at least the option of prolonging it again, six sources told Reuters.
A strong euro, with its dampening effect on inflation, is driving a rift among ECB policymakers, the sources said.
The split is between "hawks"' -- led by richer countries such as Germany -- who are ready to wind down the 2.3 trillion euros bond-purchase programme and "doves" who simply want to reduce its monthly pace, the sources said.
"The story highlights the push-and-pull on the ECB's Governing Council," said Rabobank fixed income strategist Lyn Graham-Taylor.
Euro zone bond yields fell broadly after the report, with Germany's benchmark 10-year Bund yield falling as much as 2.5 basis points to a session low of 0.43 percent.
European stocks were up very slightly after the report, and held just in positive territory.
The euro shed around 40 ticks to trade at $1.1961 on the report, giving up some of its earlier gains on the US dollar .
It was at $1.1970 in late European trade, up 0.15 percent.
"It's not completely new to the market that the ECB is looking at the euro and it's not very surprising with the rapid increase in the euro since April," said Niels Christensen, currency strategist at Nordea.
"That said, I think the market and my own impression was that, when Draghi was speaking at the (last ECB) press conference he did not express that much concern."
Most euro zone bond yields were down 1-3 basis points in late trade, with peripheral debt markets continuing to outperform in the wake of Portugal's return to an investment grade rating.
Standard & Poor's on Friday became the first of the big three credit ratings agencies to lift Portugal back to investment grade, citing an improving economy and public finances.
Still, further falls across euro zone bond yields were limited by caution ahead of a US Federal Reserve meeting.
The US central bank is widely expected to announce on Wednesday that it will begin paring its bond holdings, with reductions likely to start in the coming months.
Investors will also be watching for signals that the Fed will raise interest rates in December.
Comments
Comments are closed for this article.