Euro, European Bond Yields Shoot Higher After ECB Announcement

By Joseph Adinolfi Markets MarketWatch Pulse

The euro and European bond yields shot higher on Thursday after the European Central Bank left interest rates unchanged while announcing an extension of its bond-buying program. The shared currency spiked after the announcement, rising 0.7% to $1.0874, its highest level in three weeks. The yield on the German 10-year bund rose 8.8 basis points to 0.433%, its highest level since January. While the ECB said it would extend its massive bond buying program through the end of 2017, the central bank surprised investors by saying it would taper the program to 60 billion euros ($64 billion) a month, down from 80 billion euros ($86 billion) a month, beginning in April. Market strategists had expected the central bank to continue buying 80 billion euros in public and private debt a month for most of 2017. The decision reflects a batch of sanguine economic data out of the eurozone released in recent months, including signs that growth and inflation are finally beginning to accelerate. It also reflects concerns that the central bank is running out of bonds to buy that fit its criteria for eligibility.

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