Expectations for a reduction in interest rates are maintained
The yields of bonds as long as the European economy “flirts” with recession, expectations for a reduction in interest rates are maintained.
The ECB estimates that the Eurozone economy is likely to enter recession in the fourth quarter of 2023, while a weak recovery is seen in 2024.
Pressures remain on the bond markets as the latest data on the evolution of inflation do not justify a “rushed” rate cut by the European Central Bank.
ECB Governing Council member Isabel Schnabel in a social media post today said that “There are signs that the climate indicators are falling further, but the short-term economic outlook remains weak according to our forecasts.”
For his part, ECB vice-president Luis de Guidos hinted that the eurozone economy is likely to be in recession in the second half of last year and the risks to future growth remain downward (i.e. a further decline in the growth rate ). “Indicators point to an economic contraction in December as well, confirming the possibility of a technical recession in the second half of 2023 and a weak outlook for the near future,” he said.
It is recalled that the first meeting of the ECB for 2024 is scheduled for January 25, but no decisions are expected to be made on the interest rates. However, investors expect – according to futures market data – that the ECB will proceed with at least five (5) interest rate cuts within 2024, starting in March or April, it was underlined in the RES EIA.
In the secondary bond market today, and more specifically in the Electronic Transaction System (HDAT) of the Bank of Greece, transactions of 150 million euros were recorded, of which 69 million euros related to purchase orders.
The yield on the Greek 10-year bond stood at 3.27% from 3.33% that closed on Friday against 2.21% of the corresponding German bond, resulting in a spread of 1.06%.
In the foreign exchange market, the euro moves upwards against the dollar, with the result that in the afternoon the European currency trades at 1.0952 dollars from the level of 1.0931 dollars, which opened the market.
