LONDON: Euro zone government bond yields edged up on Thursday ahead of a widely anticipated interest-rate cut by the European Central Bank later in the day. Markets fully expect a quarter-point cut by the ECB to 3.5%.
Right now, traders are pricing in the possibility of two more rate cuts this year, although analysts said this might be excessive.
Euro zone yields edge lower, investors await central bankers’ meeting
So the focus will be squarely what ECB President Christine Lagarde communicates about the growth and inflation outlook at the post-decision press conference.
“Today’s ECB projections are key, but the hurdle for back-to-back cuts seems high,” Commerzbank head of interest rate strategy Michael Leister said.
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German 10-year Bund yields were up 1.5 basis points at 2.114%, having touched 2.086% on Wednesday, its lowest since the market turmoil of early August.
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Two-year Schatz yields were up 2.4 bps at 2.159%, keeping the premium over 10-year debt at just 4.7 bps, near its narrowest for two years.
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Italian 10-year yields, which on Wednesday fell to their lowest since August 2022, were flat at 3.45%, leaving their premium over Bunds up 6.75 bps at 141.5 bps.
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French 10-year OATs up 1.8 bps at 2.831%, leaving the spread over Bunds at 70.7 bps, within its recent trading range.
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Debt sales: Germany to announce reopening of 30-year Bunds, Italy to sell 6.5 billion euros in 3.45% 2027 BTPs.
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