LONDON: Euro zone bond yields rose on Friday as traders further ramped up bets on European Central Bank rate hikes this year. Minutes from the ECB’s latest policy meeting, which were more hawkish than expected, had already pushed yields higher after they were published on Thursday.
The minutes showed some policymakers wanted to go further than ending bond purchases at some point in the third quarter by setting a firm end-date.
Traders moved to price in over 65 basis points of ECB rate hikes by the end of the year, compared to around 60 bps before the minutes were released.
Expectations for rate hikes next year have also moved sharply higher. For example markets are betting rates will rise to around 1.15% in July 2023, up from around 0.95% at the start of the month.
Banks are also adjusting their calls.
Goldman Sachs, which had cut its call following the invasion of Ukraine, and Danske Bank now expect the ECB to deliver 25 basis-point hikes in both September and December. Societe Generale moved to the same forecast on Thursday.
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