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Friday, July 19, 2024

Bond yields fall ahead of an expected interest rate cut by the ECB

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Bond yields on the secondary market are falling today, two days before the ECB – according to all indications – proceeds with its first rate cut.

Both analysts and the markets are discounting that the ECB will start the reduction of interest rates by 0.25% from the day after tomorrow Thursday, with the result that the basic deposit rate will be 3.75% from 4% that it is today.

The ECB's decision – the first since 2019 – is considered the result of both the de-escalation path followed by inflation and the slowdown in economic growth in the eurozone.

It is recalled that the GDP of the eurozone increased in the first quarter of the year by only 0.3%, while inflation increased marginally to 2.6% in May from 2.4% in April.

However, interestingly the ECB's revised forecasts for the path of inflation and GDP are expected, which will be published together with the decisions on monetary policy.

However, the markets remain restrained now considering that overall the ECB will proceed with only three small reductions in its interest rates. In particular, the meetings of the Governing Council of the ECB, in June, September and December, are milestones.

In the secondary bond market today, and more specifically in the Electronic Transaction System (EDAT) of the Bank of Greece, were recorded transactions of 91 million euros, of which 53 million euros related to purchase orders.

The yield on the Greek 10-year bond increased to 3.60% from 3.70 that closed yesterday, against 2.52 % of the corresponding German title, resulting in a margin of 1.08%.

In the foreign exchange market, the euro is moving upwards against the dollar, with the result that in the afternoon the European currency is trading at 1.087 dollars from $1.0800 level, at which the market opened.

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Source: www.kathimerini.com.cy

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