December 8, 2016 / 1:09 PM / a year ago

Bond yields jump, euro gyrates after ECB trims monthly purchases

LONDON, Dec 8 (Reuters) - The euro jumped to a 1-month high against the dollar and long-dated German bond yields hit their highest in almost a year on Thursday after the ECB said it would reduce the pace of its programme of quantitative easing for the economy from April.

The bank extended its current programme until the end of next year, but said that purchases would proceed at 60 billion euros a month, compared to the current 80 billion euros.

The euro surged by almost a cent after the bank’s statement to hit $1.0875, but it quickly retreated to $1.0753 - flat on the day.

After initially turning negative following the ECB announcement, European shares extended gains with the STOXX last trading up 0.6 percent, underpinned by strong gains among banking sector stocks.

Euribor money market futures <0#FEI:> fell as much 8 bps across the 2017-2020 curve as investors moved to price in a slim chance of a rise in euro zone interest rates late next year.

“The bank has extended its quantitative easing program until December which is more than what the market was expecting,” said Naeem Aslam, chief market analyst at ThinkMarkets.

“However, the bank is going to reduce their firepower after March and will only be purchasing 60 billion. So you can say that the bank is tapering in a more dovish way.” (Reporting by London markets team)

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