Market Updates
European Rates Drop and German Yield Turn Negative
Nigel Thomas
25 Aug, 2014
New York City
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European markets closed higher after European Central Bank President Mario Draghi signalled more quantitative easing steps and France overhauled cabinet after the government collapsed.
European markets closed higher after European Central Bank President Mario Draghi signalled more quantitative easing steps and France overhauled cabinet after the government collapsed.
The expectations rose for another round of stimulus and market indexes rose and bond yields fell.
Draghi said that investor expectations of inflation have dropped and the rate setting committee will take this into account.
“The Governing Council will acknowledge these developments and within its mandate will use all the available instruments need to ensure price stability over the medium term,” Draghi said at the Federal Reserve Bank of Kansas City’s annual economic symposium.
The euro declined to 11-month against the dollar and fell 0.3% to $1.3199 and the yield on Italian 10-year government bond dropped to 2.462% and the equivalent Spanish yield declined to an all-time low of 2.23%.
Germany’s two-year note yield decreased 4 basis points to minus 0.04%, the lowest since December. Belgian two-year note also traded at negative yield but recovered to close at 0006% and 10-year rate fell six basis points to 1.28%.
French President was forced to overhaul the cabinet for the third time in two years after warring factions forced the resignation of Prime Minister Manuel Valls after critical comments from Economy Minister Arnaud Montebourg over the weekend.
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