ECB rate cut rumour drops yields on eurozone bonds

Yields on government bonds in the eurozone and the US fell on Monday while yields in the UK and Japan were up.

Speculation about whether the European Central Bank will cut interest rates in the eurozone affected bond yields there. A newspaper interview with a senior ECB official raised the possibility that rates could be lowered in the future.

The official was quoted as saying that the bank’s monetary policy “does not rule out” such a rate cut. Yields on the 2-year Schatz were down 0.7 basis points to 2.110 percent while yields on the 10-year Bund fell 1.7 basis points to 3.216 percent.

In late morning trading in New York, meanwhile, 10-year US Treasury bonds were yielding 3.985 percent, little changed from their close on Friday.

Investors were said to be holding back on investing until Federal Reserve chairman Alan Greenspan makes an appearance in front of a congressional committee on Thursday. They are waiting to see if Mr. Greenspan drops any hints about whether or not the Fed will continue raising interest rates.

Meanwhile, yields on UK gilts rose as an auction Monday of 2020 paper worth £2.75 billion raised the interest of investors. Yields on 2-year gilts were up 2.5 basis points to 4.319 percent and 10-year yields advanced 1.9 basis points to 4.278 percent.

In Japan, the 10-year government bond was yielding 1.240 percent at the close of trade.

Story link: ECB rate cut rumour drops yields on eurozone bonds