Eurozone Bonds Quaked By Central Banks’ Moves

Eurozone government bond yields rose on Thursday after the Bank of England delivered a surprise rate rise and the European Central Bank cut stimulus, but the bonds selloff was limited as the ECB pledged to continue monetary support in 2022.

Bond yields, which move inversely to their price, shot up when the BoE raised rates by 15 basis points less than hour before the ECB’s confirmed its emergency stimulus programme would end next March.

Once its pandemic emergency bond purchases (PEPP) expires, the ECB said it would buy 40 billion euros of bonds under its conventional bond purchase programme, the APP, in Q2, and 30 billion euros in Q3.

From October onwards, purchases will be maintained at 20 billion euros, the current level, for as long as necessary. The ECB also extended the re-investment of the proceeds from the bonds it currently holds under PEPP until end-2024, from 2023.

While analysts were divided in seeing the purchase amounts as hawkish or dovish, traders appeared to focus on a dovish interpretation.