Investors await the minutes from the European Central Bank meeting conducted in September. Seventy-five basis points were raised for each of the three primary interest rates set by the ECB. This took place at the specific policy meeting.

Investors Await Clues on The Next Monetary Policy Tightening

Additionally, the investors said that they expected future sessions to bring about further interest rate rises. The hope was to move inflation closer to their medium-term aim of 2%. Investors will carefully analyze any indications in the meeting minutes. This contains clues about the Fed interest rate-hike cap. Indications that the central bank intends to reduce its balance sheet size are also included.

Daniel Lenz has addressed the topic. Daniel is the Head of Strategy for the Euro interest rate markets at DZ Bank. He claims that the subject of how much agreement there was within the Governing Council over the rate-hike cycle speed should be of particular relevance.

Daniel Lenz commented about the next significant move from Team Lagarde. He said it would likely be planned for the meeting on October 27. This is anticipated if Eurozone monetary policy decision-makers were on the same page.

Refinitiv asserts that the financial markets have already accounted for a rate hike of 75 basis points in October. According to Refinitiv statistics, the financial markets will tighten by 125 basis points by year’s end.

The yield on the German 10-year bond has risen by 3.5 basis points (bps) to 2.055% as of 07:58 GMT. It increased to 2.352%, a fresh 11-year high, on Wednesday of the preceding week. On Thursday, the yield on Italy’s 10-year government bond rose 2.5 basis points to 4.473%. This followed 27 basis points on Wednesday, the nation’s most significant daily gain since March 2020.

Italy’s Bonds Are Receiving Less Support

The ECB’s reduced support for Italy’s bonds throughout the summer led to higher rates. Yields on bonds fluctuate in the opposite direction of their prices. The ECB claims that its holdings of Italian bonds decreased by 1.24 billion euros. The investment was a part of its Pandemic Emergency Purchase Program (PEPP). August through September saw a decline.

The preceding two months had seen a rise of 9.76 billion euros, which came after that. To keep bond rates and spreads rising in vulnerable nations, the ECB said it would deploy PEPP reinvestments.

Rate strategist Hauke Siemssen of Commerzbank (ETR: CBKG) offered his thoughts on the subject. He said the figures show that the ECB has not followed up with more significant purchases. He added that this was even though the negative indication might be attributed to timing concerns over the leaner summer months.

The excellent news for BTPs, he said, is that basic gap levels are likely to hold despite increasing rates without ECB help.

The heavily watched yield differential between Italian and German 10-year rates was steady on Thursday. The interest rates stayed at around 242 basis points (bps). Today there is issuance from France and Spain on the supply side. The 2066 OAT was on sale for quite some time. From France, the deal came in, and from Spain, tenors of up to 30 years were offered.