European Bonds Rally as Traders Add to Bets on Big ECB Rate Cut
- Money markets price 40% chance of 50bps reduction in December
- ECB officials have indicated a larger cut could be considered
This article is for subscribers only.
European short-dated bonds rallied as traders added to wagers that the European Central Bank will lower interest rates by half a percentage point in December, in a bid to prop up the bloc’s flagging economy.
The yield on German two-year notes fell as much as eight basis points to 2.10%, erasing its jump since Monday when bond markets suffered a sharp selloff and outperforming UK and US peers. Swaps imply a more-than-40% chance of a half-point reduction at the final ECB meeting of the year, in contrast to last week when only a quarter-point move was envisaged.