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Europe, News

Euro zone bond yields dip, focus on ECB

(Updates prices)

By Yoruk Bahceli

Nov 25 (Reuters) – Euro zone bond yields fell for the first time in three sessions on Thursday as investors kept their focus on messaging from the European Central Bank.

The bloc’s bond yields had risen sharply this week as investors ramped up their bets on an ECB rate hike by the end of next year on Tuesday. Several policymakers drew increasing attention to upside inflationary risks.

Trading thinned on Thursday as U.S. traders were out for the Thanksgiving holiday and bond yields dipped.

Germany’s 10-year yield, the benchmark for the bloc, was down 2.5 basis points at -0.24% by 1619 GMT after rising 12 basis points over the previous three sessions.

Italy’s 10-year yield was down 1 basis points at 1.07%.

The focus was on the ECB, which published the accounts of its October meeting, which had caused turmoil in the markets as President Christine Lagarde was not seen as pushing back enough on money market bets on 20 basis points of rate hikes from the bank by the end of next year.

Policymakers may not have all the data they need in December to take a firm view on the inflation path and must keep policy options open beyond what is likely to be a crucial meeting, the accounts showed.

With messaging similar to what ECB policymakers have said in recent sessions regarding inflation, the minutes had little impact on the market.

“There is a case to be made for future central bank communication having less market-moving potential,” ING analysts told clients.

After the recent flurry of speeches and interviews, it is likely that officials have already shared all the nuggets of wisdom they intended to ahead of the mid-December ‘triple witching’ Fed/BoE/ECB meetings,” they added.

Elsewhere, headlines centred on Germany’s next government, which is working on a 2021 supplementary budget to pump more than 50 billion euros into its climate fund to speed up the transition towards a green economy.

In the primary market, Italy raised 3.25 billion euros from the auction of a two-year bond and a 10-year inflation-linked bond (Reporting by Yoruk Bahceli; editing by Jonathan Oatis)

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