September 25, 2018 / 7:15 AM / 3 months ago

Money markets price in ECB rate hike for Sept 2019

LONDON, Sept 25 (Reuters) - Euro zone money markets are now fully pricing in a 10 basis-point rate rise from the European Central Bank in September next year, as investors bet the central bank is likely to deliver its first rate rise of the cycle sooner rather than later. The difference between the overnight bank-to-bank interest rate for the euro zone - known as Eonia - and forward Eonia rates dated for the ECB’s September 2019 meeting, was almost 10 basis points on Tuesday, up from around 8.5 bps last week.

That indicates that investors are not only fully pricing in a 10 basis point hike in the ECB’s deposit rate for September but have brought forward their expectations for a rate move from October 2019.

Euro zone bond yields rose sharply on Monday after European Central Bank chief Mario Draghi highlighted a “vigorous” pick-up in underlying inflation and noted building wage pressures across the bloc. (Reporting by Dhara Ranasinghe Editing by Tommy Wilkes)

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