Eurozone Bond Yields Rise As ECB Hints At End Of Its Stimulus Program
World stocks hit a three-week high, while the euro and German Bund yields also rose as investors priced in a potentially earlier-than-expected wind-down of stimulus from the European Central Bank.
Yesterday, Peter Praet (ECB chief economist) stated that the European Central Bank will debate next week whether to end bond purchases later this year. Peter Praet's hawkish message is being seen as preparing investors for another cut in stimulus. Having revived growth with an unprecedented €2.55 trillion bond-buying scheme, ECB policymakers must decide when to end the purchases as the threat of deflation is long gone and the bloc is on its best growth run in a decade.
Expectations of QE program end lead top-rated bond yields in the euro area higher. The German 10-year bond yields rose more than 5 bp to 0.517% and marked a two-week high. Also, the yield has risen almost 14 basis points over the last two days (the biggest two-day jump since October 2016)/ France's borrowing costs rose to a three-week high at 0.86%.
France sold 9 billion euros of bonds through an auction, including a new 10-year issue, while Spain sold 4.5 billion euros of debt.