Euro Zone Bond Yields Rise Off Lows as ECB Stimulus Meets Expectations.

Euro Zone Bond Yields Rise Off Lows as ECB Stimulus Meets Expectations.

Government bond yields across the euro area edged higher on Thursday after the European Central Bank delivered a fresh stimulus package that appeared to be broadly in line with market expectations.


The ECB increased the overall size of its Pandemic Emergency Purchase Programme by 500 billion euros to 1.85 trillion euros and extended the scheme by nine months to March 2022, to keep government and corporate borrowing costs at record lows.


“The ECB has delivered on its promise to recalibrate its instruments,” said Berenberg economist Florian Hense.


“The just-announced policy package is broadly in line with our and market expectations.”


The euro zone’s central bank had made clear for weeks that more easing was coming and so bond yields edged higher after its statement.


Germany’s benchmark 10-year Bund yield was last up 1.3 bps on the day at -0.59%, having traded 2 basis points lower before the announcement. It had fallen to a one-month low earlier in the session at -0.63%.


The ECB also extended the period during which banks will get a rebate rate on their Targeted Longer-Term Refinancing Operations (TLTRO) by one year to June 2022.


Southern European bond yields meanwhile rose from record lows. Italian 10-year government bond yields were at 0.53%, marginally lower on the day but off record lows at 0.50% hit earlier.


Spanish and Portuguese 10-year yields also rose from record lows at 0.005% and -0.03% respectively hit earlier. Focus now turned to the ECB’s news conference at 1330 GMT. Downgrades to economic growth and inflation forecasts are also expected.

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