LONDON, Sept 3 (Reuters) - The euro zone zone’s stock and bonds rallied on Tuesday following a Reuters report that ECB policymakers are leaning towards a stimulus package that includes an interest rate cut and a beefed-up pledge to keep rates low for longer.
Many also favour restarting asset buys, a significantly more powerful weapon, but opposition from some northern European countries is complicating this issue, sources familiar with the European Central Bank discussions said.
Accordung to the report, the ECB could also introduce compensation for banks over the side-effects of negative rates.
Southern euro zone bond prices rose after the report, pushing the yield on Italy’s 10-year bond to a new record low of 0.87%.
The Euro STOXX index jumped briefly, cutting some losses, mainly due to a sharp spike in shares of Italian banks. The Italian banking index turned positive, rising 0.6% as of 1341 GMT. (Reporting by the London Markets Team; Editing by Tommy Wilkes)