German government bonds are trading little changed Thurs ahead of key policy decisions from the ecb, with prices pressured by selling in Gilts after the Bank of England increases its quantitative easing programme by Stg50.0bln – as expected. Most in the market expect the ECB to cut its key refi rate by 25bps to 0.75% and most do not rule out a cut in the deposit rate, although views are mixed here – some suggest 12.5bps and a minority expect a cut to zero percent. Views are also mixed on likelihood of further non-standard measures, but recent collateral changes at the central bank imply increased risks of further LTROs down the line. Sep Bunds pared gains on profit-taking ahead of the ECB policy decision with prices weighed by selling in Gilts after the Bank of England announced increase in size of Asset Purchase Programme by Stg50bln to Stg375bln and left Bank Rate unchanged at 0.5%, as widely expected and priced in. Some in the market were expecting Stg75bln additional QE. Spain 10-year yield spreads are 22bps wider at +514bp following lackluster bond auctions, where E3.001bln sold.
EasyForexNews Research Team