(BFM Bourse) – The yield on the 10-year French bond is at its lowest since March, while inflation has fallen to a three-and-a-half-year low. Which could encourage the ECB to lower its key rates once again this month.
Inflationary tensions in the euro zone seem to be a thing of the past. Consumer prices in the area increased by 1.8% over one year, below the 2% target set by the European Central Bank (ECB). This decline in prices to three and a half year lows, certainly due to a decline in energy prices, could push the European Central Bank (ECB) to continue its cycle of monetary easing from October 17.
“The drop in overall euro zone inflation below 2% in September should be enough to persuade the European Central Bank (ECB) to cut rates in October, even if services inflation remains high,” judges Capital. Economics.
In the bond market, this scenario of monetary easing is gaining ground in the minds of investors. They expect the ECB to make a further rate cut of 25 basis points (0.25 percentage points) at its meeting on October 17.
In Europe, the yield on the 10-year German bond – the benchmark in the euro zone – fell by 9 basis points, from 2.13% Monday evening to 2.04% this Tuesday afternoon, on the secondary market, that is to say where investors exchange country debt with each other.
This dynamic is proving even more favorable to French borrowing rates. The yield on the 10-year French Treasury bond fell significantly, by 13 basis points to stand at 2.79% compared to 2.92% Monday evening. The 10-year French debt rate is thus approaching its level of last March.
This good news on the inflation front therefore gives a little respite on the French signature. Recently, it had suffered from the political and budgetary uncertainty that has reigned in France since the dissolution of the National Assembly by Emmanuel Macron last June.
A sign that this situation was not to the taste of the markets, the yield on the 10-year French bond had even exceeded that of the same Spanish security for the first time since 2008.
An ECB ready for another rate cut in October
Markets are increasingly confident about further rate cuts in Europe. Especially since the latest comments from officials of the European monetary institution further fuel this possibility.
Recent data on the direction of prices “reinforces our confidence that inflation will return to target in due time”, Christine Lagarde said during a hearing before the European Parliament’s economic committee. “We will take this into account at our next monetary policy meeting in October,” she added.
“Recent statistical data has confirmed once again that inflation is slowing. In my opinion, this means that there is now more reason to justify a rate cut at our October meeting,” he said. side explained this Tuesday the governor of the Bank of Finland, Olli Rehn cited by Reuters.
“A cut in interest rates in October by the ECB now seems very likely,” says Capital Economics.
On the Paris Stock Exchange, this easing of rates gives a slight boost to the CAC 40, which is now moving in the green direction. The flagship Parisian index gained 0.13% to 7,465 points this Tuesday around 3:10 p.m., trying to recover from a 2% drop on Monday.
Sabrina Sadgui – ©2024 BFM Bourse
