LONDON, Sept 21 (Reuters) – Euro zone bond yields rose to multi-month highs on Thursday after the Federal Reserve projected another rate hike at the end of the year and tighter monetary policy through 2024. what was expected then.
Investors’ attention remains focused on central banks, with rate-setting meetings in the United Kingdom, Norway, Sweden and Switzerland.
According to the updated quarterly projection published by the US central bank, the Federal Reserve’s benchmark overnight interest rate may rise again this year, to between 5.50% and 5.75%, and rates will remain tighter in 2024 than previously expected.
Reflecting the rise in US Treasury yields, the 10-year German government yield rose, hitting a new six-month high. The yield moves back to the price.
At the time of writing this article, it has increased by 2.8 basis points, to 2.73%, after reaching the highest level since the beginning of March.
The yield on the 2-year German bond, highly sensitive to changes in interest rate expectations, rose 2.7 basis points to 3.28%, after hitting its highest since mid -mid July.
“We still think the Fed is done raising rates. The bar for another hike in November is high and the data should surprise a lot on the upside for the Fed to hike again,” Mohit said. Kumar, rates strategist at Jefferies. .
“Our order of preference in terms of duration is ‘gilts’, ‘bunds’ and (US Treasuries), because in the first two cases there are clearer signs that central banks are done,” added he.
The European Central Bank raised interest rates last week and will review them at the end of October. Investors believe that borrowing costs will remain at 4%, based on derivatives market prices.
CENTRALLY ACTING BANKS
The Bank of England (BoE) meeting later in the day will be closely watched after Britain’s top inflation rate unexpectedly slowed, raising the possibility that the BoE will end its long streak of interest rate hikes.
“Any dovish signal from the Bank of England, or even a decision to keep rates, will help improve sentiment in the fixed income market,” UniCredit strategists said in a note to clients.
The term “dove” refers to positions in favor of monetary relaxation or supporters of such decisions.
The yield on the 10-year gilt rose 3.5 basis points to 4.25%, after falling to its lowest level since July on Wednesday.
The yield on Italian 10-year bonds rose 5.1 basis points to 4.50%.
The Swiss National Bank kept the official interest rate unchanged at 1.75% on Thursday, marking the first time the central bank has not raised rates since March 2022.
For its part, the Central Bank of Sweden raised the official interest rate by a quarter of a percentage point on Thursday, to 4.00%, as expected, and said it needs to do more to restore the inflation to its 2% target.