LONDON Dec 8 The single currency and euro zone
government bond yields retreated from the day's highs on
Thursday after the European Central Bank unveiled "less for
longer" tweaks to its bond purchase programme.
Euro zone government bonds initially sold off while the euro
strengthened after the ECB said it would trim its purchases from
April 2017 but extend the programme (APP) until the end of next
year. Markets had expected only a six-month extension.
"Less for longer is the take-away from the ECB so far," said
Mizuho strategist Peter Chatwell. "However, make no mistake, the
ECB has eased monetary policy with this move. Moreover, a slower
but longer execution does mean that in December 2017 and 2018
the APP may be doing more than we had expected."
Most euro zone government bond yields were up 2-8 bps on the
day after ECB President Mario Draghi detailed the changes, but
were at or below levels hit just ahead of the ECB announcement.
Germany's 10-year bond yield, the benchmark for the region,
was up 8 bps at 0.43 percent, after falling as low as 0.37
percent, level with where it stood just before the ECB decision.
The euro initially surged after the ECB decision, but it
quickly fell back and extended falls during Draghi's news
conference to trade as much as 1 percent down on the day at
"The euro is not behaving like a taper has just been
announced and instead is making new lows for the day. The reason
for this is that we have not just had a normal tapering of QE,
the ECB has delivered a taper with a twist," said OANDA analyst
The result is that the ECB has committed to buying 540
billion euros of debt from the end of April rather than 480
billion, which it would have bought had the monthly bond
purchases not been reduced and the program extended by six
months, he said.
German two-year yields fell after the ECB widened the
maturity range for purchases and said it would buy bonds with
yields below the minus 0.4 percent deposit rate.
By 1418 GMT, it was 6.4 bps on the day at minus 0.745
percent. The gap between two and 30-year German
bond yields hit their widest since July 2015 as curves
In money markets, forward EONIA rates fell back, implying
markets sees diminishing chance of an ECB rate rise in 2017.
(Additional reporting by Jemima Kelly, editing by Nigel