The Spanish government bonds slumped on Monday after reading strong producer price index figure. The yield on the benchmark 10-year bonds, which moves inversely to its price, moved rose 1.50 pct to 1.628 pct and the yield on the 2-year bonds climbed 28 pct to -0.018 pct by 0755 GMT.
The March producer price index rose 0.7 pct m/m, from down 1.3 pct m/m in February. On annually basis, it decline 5.4 pct y/y, as compared to prior -5.7 pct.
On Thursday, the ECB Governing Council decided to keep its monetary policy stance unchanged. Additional easing measures were not discussed at the meeting, but the Governing Council left no doubt to act immediately by using all the instruments available within its mandate if new downside risks to the outlook for price stability should arise. Therefore, the easing bias remains unchanged in place. The key ECB interest rates remained on hold and are expected to stay at current or even lower levels for an extended period of time, and well past the horizon of the ECB's net asset purchases. As regards helicopter money, ECB President Draghi pointed out that this instrument is fraught with operational and legal difficulties. In response on the recent criticism on the current monetary policy stance the Governing Council unanimously stressed that the ECB is independent and is acting according to its mandate. With no hints that another review and reconsidering of the monetary policy stance at the June meeting is necessary, the introduction of additional easing measures in that meeting is unlikely.
On the other hand, the European Central Bank Governing Council member Nowotny said on Reuters that Euro zone needs negative interest rates to avoid deflation. Said will welcome raising rates, the sooner the better, but not yet. This will happen as soon as the economy is doing better, business activity picks up and inflation gets higher, he added.
Meanwhile, markets in the Spain will now focus on a greater flow of economic data throughout the week, retail sales on Wednesday (0700 GMT), Consumer prices Index and unemployment on Thursday (0700 GMT) and Spanish Q1 Gross Domestic Product (GDP) on Friday (0700 GMT). The investors will also look forward to next week’s FOMC meeting on Wednesday, 27th April.
The material has been provided by InstaForex Company – www.instaforex.com