UK markets closed

UNICREDIT SPA UNICREDIT ORD SHS (0RLS.IL)

IOB - IOB Delayed price. Currency in EUR
Add to watchlist
8.50-0.27 (-3.06%)
At close: 4:45PM GMT
Full screen
Loading interactive chart…
  • ECB ‘Closely Monitoring’ Bond Yields as Gains Spark Concern
    Bloomberg

    ECB ‘Closely Monitoring’ Bond Yields as Gains Spark Concern

    (Bloomberg) -- European Central Bank President Christine Lagarde said her institution is “closely monitoring” the market for government bonds, in a sign that she might act to prevent rising yields undermining the economic recovery from the pandemic.Yields are on the increase worldwide as investors bet that vaccinations will soon enable countries to end coronavirus restrictions, potentially unleashing a burst of consumer spending -- also fueled by fiscal stimulus -- that could boost inflation.While the trend suggests optimism in the recovery, it could also stymie the rebound by boosting the cost of financing the massive public and private-sector debt burdens built up during the pandemic. The ECB has pledged to keep financing conditions favorable until the crisis is past.“Sovereign yields are particularly important,” Lagarde said at a European Parliament event on Monday.“Banks use those yields as a reference when setting the price of their loans to households and firms,” she said. “Accordingly, the ECB is closely monitoring the evolution of longer-term nominal bond yields.”European yields fell after the comments, with German 30-years dropping 6 basis points to 0.15%. At the start of the year they were at around -0.20%UniCredit group chief economist Erik Nielsen said in a note on Sunday that higher long-term yields are a bigger risk for the ECB than a currency that is too strong.“If euro-zone sovereign yields continue to move higher in coming weeks, it’ll leave the ECB no choice but to step up their purchases with the pandemic emergency purchase program to counter this undesirable tightening of monetary conditions,” he said. “I would be surprised if we don’t hear the first warning shots from key members within the next couple of weeks.”While Lagarde appears to have fired such a warning shot, the central bank is also already gradually stepping up its bond-buying. It bought 17.2 billion euros ($20.9 billion) under the pandemic purchase program last week, the most since the week ended Jan. 15.So-called “reflation trades” by investors are pushing yields up elsewhere. Australian 10-year yields on Monday climbed the most since the height of the market dislocation in March 2020.U.S. yields are also up, amid expectations of more fiscal stimulus. Still, Federal Reserve Bank of New York President John Williams signaled no desire to intervene by telling CNBC that it’s a sign of optimism in the recovery.ECB Governing Council member Francois Villeroy de Galhau, the head of the Bank of France, said on Monday evening that there is no risk of excessive inflation in the euro zone but the central bank must stick to its pledge.“We are watching long rates closely as it is an important element of favorable financial conditions,” he told BFM Business TV. “Financing conditions remain very favorable -- France is financing itself for 10 years at -0.1% tonight -- but we will ensure they remain favorable.”Lagarde also called for fiscal policy to continue to play a large role in supporting the economy.“Firms and households will only be able to take full advantage of favorable financing conditions if national policy measures are deployed to help monetary policy unfold its full potential,” she said.That view was shared by Kristalina Georgieva, head of the International Monetary Fund, at the same event. While ending the health crisis remains the top priority, policy makers should also avoid any premature withdrawal of support measures, she said.(Updates with comment from Villeroy from 12th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

  • European banks boosted as ECB relaxes dividend rules
    Yahoo Finance UK

    European banks boosted as ECB relaxes dividend rules

    ECB's recommendation to allow lenders to restart limited dividend payments next year sparks cautious optimism among investors.

  • European banks hope for better 2021 after year to forget
    Yahoo Finance UK

    European banks hope for better 2021 after year to forget

    European banks have been among the worst performing sectors in 2020 due the COVID-19 pandemic and subsequent dividend bans.