LONDON, Dec 17 (Reuters) - German Bund and Italian BTP futures rose on Thursday after the Federal Reserve raised interest rates for the first time in nearly a decade in a long-awaited move that signalled faith in the U.S. economy.
The U.S. central bank made clear the rate hike was a tentative beginning to a “gradual” tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains below target.
Fed policymakers’ median projected target interest rate for 2016 remained 1.375 percent, implying four quarter-point hikes next year.
“Still, a meaningful hike cycle lacks credibility and we like long-end rate levels,” Citi strategists said in a note.
German Bund futures were 30 ticks higher at 157.62, while Italian BTP futures rose 22 ticks to 136.72.
Ten-year German Bund yields fell 2 basis points to 0.65 percent, with most other euro zone bond yields indicated a touch lower.
“Markets cheered the Fed’s commitment to a gradual and data-dependent pace of rate hikes,” Societe Generale strategists said in a note.
Euro zone money market rates and short-term bond yields were little changed. (Reporting by Marius Zaharia, editing by Nigel Stephenson)