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Bloomberg: Possibly 3 More ECB Rate Rises This Year

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The Germans are feeling confident, watch out Ireland and Spain. What if they win the World Cup?

European Bonds May Drop on Expectations ECB to Raise Rates More Than Twice

June 28 (Bloomberg) -- European two-year government bonds may extend their longest losing streak since November on speculation the European Central Bank will raise interest rates more than twice this year.

Traders have lifted bets the ECB will act, helping push two- year yields to the highest in almost four years this week, as reports showed German investor confidence rose to a 15-year high and ECB policy makers said they may accelerate the pace of rate increases. An industry report today showed consumer confidence in Germany rose to the highest in almost five years.

``The danger is that the market will have to keep pushing up its rate expectations,'' said Anthony O'Brien, an interest-rate strategist at Barclays Capital in London. ``We could see yields moving even higher.''

The yield on the benchmark German two-year bond, among the most sensitive securities to interest-rate expectations, rose 1 basis point to 3.58 percent at 10:12 a.m. in London. The price of the 3.25 percent bond due June 2008 fell 0.02 or 20 euro cents per 1,000 euro ($1,255) face amount, to 99.38, according to Deutsche Bank AG. Yields move inversely to prices.

GfK's confidence index, based on a June survey of about 2,000 people that aims to forecast household spending one month ahead, climbed to 7.8, the highest level since November 2001, from a revised 7.0 in the previous month, the market-research company said in an e-mailed statement today.

Bonds have been hurt this quarter as traders raise bets ECB policy makers will lift borrowing costs from 2.75 percent as the region's economy expands. Ten-year debt is set for a fourth straight quarter of declines, the longest losing streak since 1999, according to Bloomberg data.

`Nothing to Stop'

The yield on the December interest-rate futures contract has risen for seven consecutive days, indicating traders are raising bets the ECB will boost rates twice more this year.

There is ``nothing to stop'' the ECB from taking a ``more aggressive'' adjustment to borrowing costs ``should the need'' exist, Garganas said two days ago in an interview in Basel, Switzerland. ``I would not rule out a higher adjustment to rates than 25 basis points,'' nor quickening the pace of increases from once every quarter, he said.

Garganas said today at a conference in Athens that interest rates are ``historically low.'' Fellow ECB council member Yves Mersch is scheduled to make a speech in Luxembourg today.

ECB President Jean-Claude Trichet said yesterday the bank will continue to do what's necessary to ensure price stability as the region's economy expands.

The Ifo economic research institute in Munich said yesterday its confidence index, based on a survey of 7,000 executives, rose to 106.8 from a revised 105.7 in May. It reached a 15-year high of 105.9 in April. Economists expected a drop to 105, according to the median of 44 estimates in a Bloomberg survey.

Italian Business

A separate survey showed Italian business sentiment unexpectedly improved in June to the highest in 5 1/2 years. The Isae Institute's confidence index rose for a 13th month to 98.9 from a revised 97, the institute said today in Rome.

The yield on the three-month Euribor contract due in December 2006 has risen 16 basis points this month to 3.63 percent.

The contracts, traded on the London International Financial Futures Exchange, settle to the three-month euro interbank offered rate, which has averaged 16 basis points above the ECB's benchmark rate since the 1999 introduction of the euro.

Germany today sold 4.1 billion euros of additional five-year bonds, the Bundesbank said. The 3.5 percent notes attracted bids worth 1.8 times the amount sold, up from a so-called bid-to-cover ratio of 1.5 in the previous auction on April 26.

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There is ``nothing to stop'' the ECB from taking a ``more aggressive'' adjustment to borrowing costs ``should the need'' exist, Garganas said two days ago in an interview in Basel, Switzerland. ``I would not rule out a higher adjustment to rates than 25 basis points,'' nor quickening the pace of increases from once every quarter, he said.

Looks like central banks worldwide are realising theyve got to get on the 'IR Ladder' as IR trend seems to be heading in the direction of more frequent and larger hikes

Brown & Balls - get on the IR Ladder quick or UK will miss the boat!

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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