Italian 10yr yields drop to 0.67, lowest since April
ECB to meet for first time since policy tweak
Market expects extended period of stimulus
LONDON, July 22 Reuters Italian borrowing costs sunk to their lowest in over three months on Thursday ahead of a European Central Bank meeting where its chief Christine Lagarde is expected to elaborate on a new target widely perceived as having dovish implications.
The ECB will meet for the first time since it unveiled a tweaked inflation target earlier this month and is all but certain to promise an even longer period of stimulus to make good on its commitment to boost inflation.
Lowerrated euro zone bond yields were broadly lower in morning trade as investors positioned for that.
The July meeting was never expected to matter much, but following the strategy review could turn out to be a decisive milestone, analysts at RBC said in a note.
They said they expected policymakers would use this opportunity to steer markets towards an even longer period of low rates than currently priced in.
Italys 10year bond yield dropped two basis points to 0.6708, the lowest since early April, and other southern European benchmark bond yields were also down 12 basis points on the day.,,
The ECBs recent statement that it believes any further cut in interest rates would not be beneficial given their already low levels has led investors to conclude that the focus will shift even further to bond purchases.
Italy, as one of the lowestrated…