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German yields drop, indicate loose ECB policy?

FXStreet (Mumbai) - German Bund yields held near their lowest levels in two weeks on Friday, an indication that markets expect the ECB to ease its policy further in response to dropping Fed rate hike bets.

The benchmark 10-yr German bund yield currently trades 2.1 basis points to 0.535%. The US retail sales edged up just 0.1% last month, leading to a drop in the Fed rate hike bets.

Consequently, German 10-yr yield, which tracks their top-rated peers in the US dropped. Moreover, expectations are on the rise that the ECB would have to bolster its QE program due to falling Fed rate hike bets.

Euro zone money markets are also pricing-in a about a 50% chance of a deposit rate cut in the coming year.

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