Euro Zone Bond Yields Higher, Follow Up Market Caution

Due to the disappointing policy of the European Central Bank (ECB) last December, the financial market is now predicting that the central bank will have little chance of cutting interest rates this week, although oil prices are only slightly higher than the ECB's half of 2016's forecast level, and long-term inflation expectations are at its lowest level for more than three months.

In December last year, the European Central Bank announced that the deposit rate would be reduced by 10 basis points to -0.3%, and the asset purchase plan of 60 billion euros per month should be extended for six months until March 2017.

But before the meeting, the European central bank originally suggested that the interest rate cuts seemed to be bigger, and the scale of the monthly purchase of debt should be expanded and other measures taken, which disappointed the market.

Eurozone bond yields rose slightly on Monday (January 17th), and short-term interest rates remained stable, indicating that the market is cautious now after the ECB's disappointing measures in December.

In 2012, Mario Draghi, the European central bank governor, promised to "make every effort to defend the euro" and set up a strong reputation in the financial market.

The European Central Bank has launched the world since 2008.

The most powerful monetary stimulus since then.

Elwin de Groot, a senior market analyst at Holland cooperative bank, said, "I can't recall the disappointment of Delaki in which policy meeting, so in my view, this shows that the ECB is reluctant to make more efforts."

According to foreign media reports last week, many European Central Bank officials are skeptical about whether there is any need for further policy action in the near future.

Bayerische Landesbank senior analyst Alexander Aldinger said, "the ECB is not expected to introduce any monetary easing decision this week, but after the disappointing meeting in December, the central bank's tone should be mild."

Although the euro's weakness will help to inflate inflation and boost exports, the euro / dollar is nearly 1.09 stronger at the $4% level than it was on the day before December.

Judging by the spread between overnight interbank lending rates and forward interest rates based on the ECB meeting schedule, the money market reflects less than 10% of the January meeting's further downgrading of 10 basis points.

UniCredit Research chief euro zone economist Marco Valli said, "Europe."

The possibility of resorting to new stimulus measures will depend in large part on the future trend of oil prices.

He said that if oil prices remained at $30-35 a barrel, the European Central Bank would be able to resist further easing.

Since 2016, international oil prices have plunged more than 20%, hitting a low of $27.67 a barrel on Monday.

The European Central Bank's internal economic forecast in 2016 assumes that oil price is $52.2 per barrel, while the euro zone economy is expected to grow by 1.7% in 2016.

It is 1%.

The "five year, five year forward" profit and loss inflation rate, which measures long-term inflation expectations, hit 1.60% lower on Monday, the lowest since early October.

This is expected to be sensitive to oil price fluctuations.

At the same time, the one-year inflation swaps are at a level below zero, indicating that the market expects inflation to drop from the current 0.2% in the short term rather than towards the ECB's target of a little less than 2%.

In addition, the two-year inflation swap is slightly below 0.3%.

The 30 year inflation rate is slightly higher than 1.6%.