LONDON: Euro zone yields fell on Wednesday after ECB president Mario Draghi again stressed the central bank would assess the impact of its monetary stimulus next month and remains ready and willing to act.
Expectations of additional easing have ebbed since the European Central Bank meeting two weeks ago, when Draghi hinted the ECB's 1 trillion euro bond-buying quantitative easing scheme could be expanded or extended, and re-opened the door to further rate cuts. In various interviews since that meeting, ECB policymakers have been more guarded, with some urging caution after some forecast-beating economic readings.
But, pointing to the downside risks to the bloc's growth and inflation prospects stemming from a brewing emerging markets crisis, Draghi reiterated that the degree of monetary policy accommodation would be re-examined at the next meeting.
"Draghi is back to the communication we have seen in the last press conference meaning the chances for additional QE are very much there, and that has led to a good opening this morning," Natixis' head of strategy Jean-Francois Robin said.
German 10-year yields - the euro zone benchmark - were 2 basis point lower at 0.56 percent, but still well off six-month lows of 0.42 percent touched last week.
Italian and Spanish yields were 2 bps lower at 1.53 percent and 1.72 percent, respectively, as were most other euro zone equivalents. Portuguese bonds were the best performers as opposition parties struggle to join forces a week before a vote at which they have pledged to topple Lisbon's minority government.
Ten-year yields fell 6 basis points to 2.52 percent Portugal's opposition Socialists said late Tuesday they were still trying a reach agreement with two other left-wing parties for a majority-backed coalition.
Parliament will debate the centre-right government's policy programme next Monday before a vote on Tuesday or Wednesday, which could bring down the new government if it is rejected.
The prospect for a rate rise in the United States as soon as next month has struck a note of caution for investors, however.
The ADP employment report due later on Wednesday will be closely watched ahead of Friday's nonfarm payrolls for clues on whether the world's largest economy is ready for its first hike in nearly a decade.
Markets are pricing in around a 50 percent chance of a hike in December.
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