Euro zone bonds rise as Fed seen more dovish than expected

LONDON, June 19 Thu Jun 19, 2014 2:13am EDT

LONDON, June 19 (Reuters) - German and Italian bond futures rose on Thursday after the U.S. Federal Reserve struck a more dovish stance on monetary policy than some had expected.

Longer-dated euro zone bonds sold off earlier this week after higher-than-expected U.S. consumer price pressures led investors to brace for the possibility that the Fed might be open to raising interest rates sooner than many in the market had previously thought.

But the Fed didn't note any inflation concerns after its policy meeting on Wednesday, and it affirmed its commitment to retaining accommodative monetary policy.

German Bund futures rose 30 ticks to 145.77 while Italian BTP futures were 51 ticks higher at 125.46.

Euro zone bonds were also supported by the European Central Bank's recent interest rate cuts and liquidity measures.

The overnight bank-to-bank Eonia lending rate fixed at 0.015 percent on Wednesday, the latest in a series of record lows after the ECB stopped a weekly deposit tender to neutralise the effect of the bond purchases it made at the height of the debt crisis, injecting tens of billions of euros into the market. (Reporting by Emelia Sithole-Matarise; Editing by Hugh Lawson)

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