Without Tuesday's decision, the ECB would have stopped
remunerating the deposits at the end of April.
(Reporting by Samuel Indyk and Yoruk Bahceli; editing by Dhara
Ranasinghe)
LONDON, Feb 7 (Reuters) - Shorter-dated euro area yields
jumped on Tuesday after the European Central Bank said it would
cut the maximum rate it pays on deposits held by governments to
give them an incentive to redeploy that cash into the financial
system.
Starting on May 1, the ECB will apply a 20 basis-points
discount to the Euro Short-Term Rate (ESTR), which is currently
the ceiling rate on government deposits.
Germany's 2-year yield jumped over 8 basis points to 2.691%
after the ECB statement . Italy's 2-year yield rose 7
basis points to 3.259%. The ECB decided to pay interest on the deposits by
temporarily lifting a 0% cap in September, easing fears that
euro zone countries would shift the cash into government bonds,
worsening a shortage of key market collateral.
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