LONDON, Sept 12 (Reuters) - Euro zone bond yields tumbled, the euro weakened and stock markets rallied on Thursday after the European Central Bank cut interest rates and said it would resume asset purchases to boost the stuttering economy.
The ECB cut its deposit rate to a record low -0.5% from -0.4% and will restart bond purchases of 20 billion euros a month from November, it said in a statement.
The news sparked a rally in government bond markets, pushing yields sharply lower across the board.
Germany’s 10-year bond yield tumbled 8 basis points to -0.64% while 30-year debt fell almost 20 bps at one point while Italian 10-year bond yields hit a record low of 0.782%.
The euro fell back below $1.10 after initially surging on the ECB announcement. After trading as high as $1.1070, the single currency then dropped to $1.0961, the day’s low and down 0.5% on the session as investors digested news of the rate cut and relaunch of QE.
The euro hit a 28-month low earlier this month of $1.0926.
Euro-zone stocks meanwhile swung into positive territory after the announcement with the benchmark index up 0.6% at 1151 GMT.
The bloc’s banking index jumped 1.4% as the central bank said it would introduce rate tiering in a move to mitigate the pain of lower interest rates on the battered financial sector.
Britain’s 10-year gilt yields dropped 6 basis points on the day to 0.58%, dragged lower by the fall in euro zone bond yields. (Reporting by the London Markets Team; Writing by Dhara Ranasinghe; Editing by Sujata Rao)
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