German Bonds Rise 4th Day as Draghi Gives Few Clues on Stimulus

  • Ten-year yield drops below zero for first time in two weeks
  • Draghi speaks to reporters after policy announcement

Will the ECB Extend QE This Year?

German government bonds rose for a fourth day as European Central Bank President Mario Draghi said officials didn’t discuss an extension or a tapering of the institution’s quantitative easing plan at a meeting on Thursday.

“It seems like Draghi wants to say as little as possible,” said Mark Dowding, a partner and fund manager at BlueBay Asset Management in London. “Market reaction suggests some slight disappointment that further easing measures were not discussed today. However, moves were tempered by Draghi fudging everything else and wanting to push the focus to the December meeting.”

Draghi was speaking to reporters in Frankfurt after the ECB said it made no changes to its key interest rates or asset-purchase program. The decision to leave the deposit rate at a record low of minus 0.4 percent was forecast by all 70 economists in a Bloomberg survey. Officials maintained the central bank’s bond-buying program at 80 billion euros ($89 billion) a month. Respondents to a separate survey predicted the ECB will extend its bond buying in December.

Germany’s 10-year bund yield dropped three basis points, or 0.03 percentage point, to 0.003 percent as of 4:30 p.m. London time, after climbing as much as four basis points. The zero percent security due in August 2026 rose 0.261, or 2.61 euros per 1,000-euro face amount, to 99.97. The yield dropped earlier below zero for the first time in two weeks, reaching minus 0.001 percent.

QE Options

Speculation that the ECB will taper its 1.7 trillion-euro QE program, which is scheduled to run until March 2017 or beyond if necessary, triggered a slide in euro-zone debt earlier this month. German 10-year bund yields climbed on Oct. 17 to the highest since the U.K.’s vote on June 23 to leave the European Union.

Investors scrutinized Draghi’s comments about adjustments to the rules of the current program after the Governing Council tasked officials with examining options to ensure it doesn’t face scarcity problems. Seventy-three percent of respondents in the Bloomberg survey said the ECB will eventually alter its program to deal with this issue.

— With assistance by Anchalee Worrachate

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