EG: Government Bonds Near Record Highs After ECB Holds Rates--2nd Update
By Tommy Stubbington
Safe-harbor government bonds held near record highs Thursday after the European Central Bank left interest rates on hold, with tensions between Russia and the West continuing to drive markets.
The German 10-year bond yield traded at 1.09%, close to the all-time low of 1.08% hit earlier in the session after the ECB announced no policy changes, as widely expected. The euro was unmoved.
Earlier, yields on the country's two-year bonds fell below zero for the first time since May 2013, meaning that investors effectively pay Germany for the safekeeping of their funds. Yields fall as prices rise.
Investors continued to worry about the effect the Russian sanctions are having on the region's fragile recovery.
"The economic ramifications of current [and potentially future] Western sanctions and retaliatory action by Russia, taken in conjunction with ongoing reports of Russian troops massing on the Ukrainian border, has seen the market on opening today continuing to trade risk off," said analysts at Rabobank.
Stocks steadied after Wednesday's heavy selloff, with the Stoxx Europe 600 0.1% lower as investors the ECB's press conference at 1230 GMT for any comment on the recent downturn in euro-zone economic data.
"We expect the ECB to reiterate its commitment to implement further easing measures should the situation worsen in the second half of the year," analysts at Barclays said.
Wednesday's sharp fall in stock markets came as Italy unexpectedly slipped back into recession and German manufacturing orders sank, heightening concerns over the economic impact of sanctions against Russia.
Early Thursday, Russian President Vladimir Putin fired back, ordering bans on imports of food and other products from the nations that have imposed restrictions on Russia.
Germany's DAX index recovered early losses to trade unchanged. Italy's FTSE MIB, which suffered the steepest declines on Wednesday, rebounded 0.5%.
The U.K.'s FTSE 100 was 0.1% lower with the Bank of England also holding interest rates, as expected.
In the U.S., stock futures pointed to a 0.2% opening gain for the S&P 500. Changes in futures aren't necessarily reflected in market moves after the opening bell.
Currency markets were largely quiet, with the euro slightly lower against the dollar at $1.337 following the ECB rate decision.
In commodities, gold was up 0.1% at $1,308.90 an ounce, and Brent crude oil fell 0.1% to $104.46 a barrel.
Write to Tommy Stubbington at tommy.stubbington@wsj.com
