(Updates with comments, context)
By Dhara Ranasinghe and Abhinav Ramnarayan
LONDON, Sept 8 The euro hit a two-week high,
bond yields across the euro zone rose and stock markets in the
region fell after ECB chief Mario Draghi said an extension of
the central bank's asset-purchase programme was not discussed at
Thursday's policy meeting.
The European Central Bank said it was looking at options to
ensure it could pursue its unprecedented money-printing
programme, but stopped short of saying it would extend the
scheme beyond next March.
That was enough to trigger a sell-off in European markets as
investors had expected Draghi to announce a six-to-nine month
extension of its quantitative easing programme or possible
tweaks to address a shortage of bonds.
"We discussed the assessment of the economy and we discussed
the broad macroeconomic projections but we didn't discuss
anything else ... We didn't discuss it," Draghi told reporters
The bank kept interest rates on hold as expected and made no
changes to its 80 billion euro a month asset-buying scheme.
"The disappointment is clearly there in the market, but the
ECB did keep the door open to more stimulus," said Kim Liu,
senior fixed income strategist, at ABN Amro.
"We now expect an announcement of an expansion and of tweaks
to the asset-purchase programme before the end of the year, most
likely at the next meeting in October."
The euro hit a two-week high of $1.1328, up 0.8
percent on the day, immediately after the remarks. The
pan-European STOXX 600 equity index extended losses as
Draghi spoke, and was down 1.2 percent by 1307 GMT.
By 1400 GMT, both moves had eased. The euro was at $1.1273,
up 0.3 percent on the day and the STOXX 600 down 0.3 percent.
Government bond yields rose sharply initially, before
retreating from the day's highs.
Germany's 10-year Bund yield was up 3.4 basis points at
minus 0.086 percent at one stage, off a high of
minus 0.063 percent, while 30-year bonds yielded 0.47 percent,
up 6.1 bps, having earlier risen as far as 0.049 percent
"The market has gotten used to the ECB pre-announcing
stimulus measures in the past, when the need was more urgent,
but they will have to get used to a more cautious approach,"
said Cosimo Marasciulo, head of European government bonds at
"The ECB is more in wait-and-see mode now and will look to
manage expectations. I expect they will announce an extension of
the programme and changes to the parameters at the end of the
Italian, Spanish and Portuguese 10-year government bond
yields rose about 4-6
Euribor futures <0#FEI:>, meanwhile, fell 1-3 basis points
across the 2016-2019 strip as investors scaled back expectations
for further easing.
(Reporting by Abhinav Ramnarayan; Editing by Catherine Evans)