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Euro zone bond yields, euro rise after ECB confirms rate-hike plans

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The euro firmed and money markets moved to price more interest rate rises after the European Central Bank on Thursday signaled a string of interest rate hikes from July and a determination to tame stubbornly high inflation.

German 10-year bond yields rose to the highest since July 2014 at 1.43% after the ECB said, as expected, it was ending bond-buying stimulus and flagged a rate rise in July. . The bond had traded around 1.37% earlier .

Money markets raised their bets on ECB rate hikes and now see 140 basis points in tightening by year-end, including 75 bps by September.

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The euro lost ground in a knee-jerk reaction immediately after the statement but then recovered and traded 0.15% higher around $1.07335 by 1200 GMT.

Against the pound too it slipped 0.13% at 85.34 pence before rising to 85.55 pence .

Euro zone shares spiked higher immediately after the ECB statement before reversing the move. The euro STOXX index was last down 0.8%, still above its earlier session low. Euro zone banks ticked lower and were last down 0.1%.

“The ‘sustained’ and ‘gradual’ language suggest they see more hikes in 2023 than is currently priced in by OIS,” said Arne Petimezas, a senior analyst at AFS Group in Amsterdam, referring to the language used in the ECB statement. (Reporting by the London Markets Team, Writing by Stefano Rebaudo, editing by Dhara Ranasinghe) ;))

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