ECB likely to adopt first deposit rate hike in Q4 2019; German 10-year yields to touch 0.8 pct by end-2018: ScotiaBank
Source: FxWire Pro - Commentary / 19 Jul 2018 03:53:30 America/New_York
The European Central Bank (ECB) is expected to adopt its first deposit rate hike only by the second quarter of 2019, according to the latest research report from Scotiabank. Moreover, Italian politics is likely keep BTP yields high in the immediate few months, keeping demand for German bunds elevated.
Euro interest rates have pushed back monetary normalisation and now appear too complacent about longer-term inflationary risks. To be sure, Eurozone economic data have surprised on the downside in the early part of the year.
Further, rates got another tailwind when the ECB suggested that rate increases are likely to come only in summer 2019. These events prompted the market to pare down rate hike expectations with the 2-year/3-month Euribor down to 0.11 percent, from as high as 0.3 percent in January. Similarly, 10-year German yields are back at 0.36 percent (broadly unchanged since the start of the year).
"We now expect 10-year German yields to touch 0.8 percent and 1.35 percent by end-2018 and end-2019 respectively," the report added.© FxWire Pro 2018. All rights reserved. The FxWire Pro content received through this service is the intellectual property of FxWire Pro or its third party suppliers. Republication or redistribution of content provided by FxWire Pro is expressly prohibited without the prior written consent of FxWire Pro, except for personal and non-commercial use. Neither FxWire Pro nor its third party suppliers shall be liable for any errors, omissions or delays in content, or for any actions taken in reliance thereon.