LONDON (Reuters) - The euro jumped on Tuesday, bond yields edged higher and European stocks gave up some gains after a top European Central Bank policymaker said the bank could raise its sub-zero desposit rate before normalising monetary policy.
Ewald Nowotny told Reuters in an interview that its 2.55 trillion euro ($3.1 trillion) bond buying programme would be wound down by the end of this year, which would then pave the way for the bank’s first rate rise since a fumbled move in 2011.
“The market is moving on Nowotny’s comments that suggest there could be a 20 basis point move on the deposit rate rather than a 10 basis point step up,” ING strategist Martin Van Vliet said.
“But though I don’t want to downplay the importance of his statements, if Draghi or Praet were to say this the move would be even bigger.”
Euro zone borrowing costs rose by 1-3 basis points across the board. The yield on Germany’s 10-year Bund, the benchmark for the bloc, rose to a 5-day high of 0.525 percent DE10YT=RR
Euro zone stocks .STOXXE slightly reduced gains but remained within their daily trading range, last up 0.5 percent.
The euro EUR=EBS briefly jumped to the day's highs of $1.2378 and was up 0.4 percent on the day.
Reporting by the London Markets Team; Editing by Tommy Wilkes
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