Bonds News

Euro, bond yields, jump on news ECB discussed rate hike before end of QE

LONDON, March 10 (Reuters) - The euro jumped to a three-week high versus the dollar and German government bond yields rose on Friday, on news the European Central Bank had discussed the possibility of raising interest rates before ending its quantitative easing programme.

Sources told Reuters some ECB rate-setters had raised the possibility of hiking rates from their current record lows before the end of QE, but that the discussion was brief, and there was not broad support for the idea.

The euro, already trading up on the day, added another 0.4 percent to reach $1.0669, its strongest since Feb. 17. That sent the dollar index to a one-week low of 101.38

The euro also hit a 1-1/2-month high of 122.745 yen , up almost 1 percent on the day.

“It’s a bit odd that you would continue to ease with QE and hike rates at the same, so we’re struggling to understand this a bit,” said Rabobank strategist Lyn Graham-Taylor.

Germany’s 10-year government bond yield hit the day’s high of 0.48 percent, up 6 basis points on the day. Most other 10-year debt of euro zone government bond yields were also up 4-5 bps on the day.

German five-year yields hit a one-month high of minus 0.40 percent, up 8 bps on day. Meanwhile, Euribor futures fell as money market investors started to price in rate rises from the ECB as early as December 2017.

European stocks erased nearly all their gains to last trade flat on the day, having been up as much as 0.5 percent earlier. (Reporting by Jemima Kelly, Dhara Ranasinghe, Abhinav Ramnarayan, John Geddie and Vikram Subhedar; Editing by)