Euro rebounds, bond yields up after ECB reveals TLTRO details

June 6 (Reuters) - The euro rebounded to the day's highs on
Thursday, Italian bank shares jumped while bond yields reversed
their knee-jerk falls after the ECB released details of its
cheap loans programme and amended its forward guidance on
interest rates.
Yields briefly fell when the statement was released but then
rose, with Germany's 10-year government bond a touch higher on
the day at -0.22% off an earlier low of -0.24%. DE10YT=RR .
Italian 10-year bond yields likewise inched up to trade
around 2.5%, having been around 2.46% earlier IT10YT=RR .
The euro zone banking stocks index .SX7E rose to the day's
high, up 1.3%, while the euro rebounded as much as 0.4%, to the
day's high of $1.127 EUR=EBS
The ECB pushed back the timing of its first post-crisis
interest rate hike and said it would continue paying banks to
lend to households and businesses as the outlook for global
growth darkens further.
It refrained from signalling bolder steps, such as cutting
rates or restarting its massive bond purchases, maintaining a
recovery in inflation towards its target of just under 2 percent
had simply been delayed, not derailed Analysts said the TLTRO programme was less generous than
hoped for.
"People believed it would be costless, but under the new
scheme, banks that are not increasing their stock of loans would
have to pay 10 bps over the MRO (main refinancing operation). It
is not that much, but it's creating incentives for banks to keep
lending to the economy," Natixis rates strategist Cyril Regnat
said.
"Italian banks are the ones holding the biggest amount of
TLTRO 2. But it will be harder to do carry trades with this
TLTRO 3 because the cost is reducing the carry of short-dated
BTPs."
Italian banks rose 1.9% to the day's highs after the
statement .FTIT8300 , as investors scaled back expectations for
an ECB rate cut in the wake of the ECB statement.