Banks expecting ECB rate cut

By Marc Castro

Nov 01, 2013 04:57 PM EDT

Italian government bonds increase, as ten year yields fell to their lowest level since early June. This comes amidst rumors of an interest rate cut to be done after its meeting to be held next week.

According to HSBC Holdings Plc Global Head of Fixed Income Research, "The inflation data does not increase a prospect of a rate cut and another round of LTRO. We are likely to get both although it may not happen next week if the ECB moves at the November meeting, it would appear a bit hasty and Draghi may have to backtrack a bit on some of what the ECB said about recovery."

The Italian ten year bonds fell four basis points to be at 4.09% at late afternoon trading in London. This was the lowest since May 29, when it pegged at 4.08%. The bond at maturity is due at 4.5% on March 2024. It also increased in value by EUR3.70 per EUR1000 face value, to be currently worth EUR103.795.

Bank of America, RBS and UBS all expect the ECB would be cutting its refinancing rate by 25 basis points after its November 7 meeting. Others, such as BNP Paribas SA, Societe Generale SA, Scotiabank and JPMorgan Chase & Co. predict a reduction to be done in December when the bank publishes its latest economic projections.

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