Latest News

Traders ramp up bets on 75 basis-point ECB Sept hike, bond yields jump


Traders ramp up bets on 75 basis-point ECB Sept hike, bond yields jump By Reuters

Breaking News


Economy 15 minutes ago (Aug 29, 2022 12:02)

© Reuters. FILE PHOTO: The euro sign is photographed in front of the former head quarter of the European Central Bank in Frankfurt, Germany, April 9, 2019. Picture is taken on slow shutter speed while the camera was moved. REUTERS/Kai Pfaffenbach

By Yoruk Bahceli

(Reuters) – Euro zone money markets moved on Monday to price in a two-thirds chance of a large 75 basis-point European Central Bank rate hike in September, as policymakers made the case over the weekend for a large move to tame inflation four times above their target.

Among the officials speaking at the Jackson Hole symposium, particularly in focus was ECB board member Isabel Schnabel, who argued that the risk is rising that long-term inflation expectations “de-anchor” from the bank’s 2% target and surveys suggest inflation is denting public trust in central banks.

Others said frontloading rate hikes would be reasonable and that the neutral rate, estimated to be around 1.5%, should be reached before the end of the year or the first quarter of 2023.

Traders on Monday priced in as much as 67 basis points of rate hikes at the bank’s Sept. 8 policy meeting, meaning they fully priced in a 50 basis-point move and a 67% chance of a 75 basis-point move, Refinitiv data showed.

That compares to a 24% chance of the larger move they priced on Friday, before a Reuters report that some policymakers wanted to discuss the bigger move pushed the odds up to 48%.

“The most important signal (from Jackson Hole) was from Schanbel who talked about the risk of inflation expectations moving above target, that the central bank would have to hike rates more violently, and that is something new,” said Jan von Gerich, chief analyst at Nordea.

As rate hike bets rose, Germany’s two-year bond yield, sensitive to interest rate expectations, rose as much as 19 basis points (bps) on the day to 1.162%, the highest since June 17.

Its 10-year yield, the benchmark for the euro area, rose as much as 15 bps on the day to 1.548%, its highest in two months.

“The ECB clearly looks with determination to frontload the hikes and this will linger on ahead of the September meeting,” said Piet Christiansen, chief analyst at Danske Bank in Copenhagen.

Ten-year yields in Italy, among the biggest beneficiaries of ECB stimulus, jumped as much as 17 bps to 3.873%, the highest since mid-June, pushing the closely-watched spread to German peers to 236 bps, the highest in a month.

“The more resolute and front-loaded these rate hikes become in the wake of weaker growth, the closer we are likely get to the point where the ECB may have to consider if TPI has to be activated,” said Rohan Khanna, strategist at UBS, referring to the ECB’s Transmission Protection Instrument.

Under the TPI, ECB will buy bonds from countries whose borrowing costs relative to Germany it sees as soaring through no fault of their own.

Arguing that the ECB skewing reinvestments from maturing bonds under its pandemic bond buying programme, a first line of defense it already deployed in June and July, wouldn’t be enough, Khanna said, “the harder the ECB pushes on the rate-hike pedal, the faster we are likely to get to 300 bps on this spread.”

Traders ramp up bets on 75 basis-point ECB Sept hike, bond yields jump

Dollar zooms higher as markets brace for higher for longer ratesBy Reuters – Aug 29, 2022

By Dhara Ranasinghe LONDON (Reuters) -The dollar shot higher on Monday, briefly scaling fresh 20-year highs against a basket of other currencies, as Federal Reserve Chair Jerome…

Finnair partners with Qatar Airways in search of new routesBy Reuters – Aug 29, 2022

(Reuters) – Finnair will establish a strategic partnership with Qatar Airways to open up new routes from Nordic capitals to the Qatari capital Doha, the Finnish national carrier…

EU Commission sells 2025 EU-Bonds at average yield of 1.695%By Reuters – Aug 29, 2022

(Reuters) – The European Commission, on behalf of the European Union, carried out on Monday an EU-Bonds auction. The results of this auction are as follows: EU-Bonds 04/07/2025…

Our Apps

Terms And Conditions
Privacy Policy
Risk Warning

© 2007-2022 Fusion Media Limited. All Rights Reserved.

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

EU Commission sells 2025 EU-Bonds at average yield of 1.695%

Previous article

Powell Straight Talk, Oil Firms and Tentative Porsche IPO – What’s Moving Markets

Next article

You may also like


Leave a reply

Your email address will not be published.

More in Latest News