By Steve Goldstein
The euro rallied on Tuesday, helped by a rise in bond yields as well as comments from a European Central Bank policymaker in which he said a half percentage point interest rate hike was possible.
Klaas Knot told a Dutch television program said he favors a quarter-point rate hike, but would support a half-point increase if new data suggest inflation is broadening further or accumulating. While regarded as one of the most hawkish voices on the ECB, Knot’s was the first to broach a half-point increase.
The yield on the Italian 2-year bond /zigman2/quotes/211347219/realtime BX:TMBMKIT-02Y +5.62% shot up 12 basis points, to 0.92%. The yield on the German 2-year bund /zigman2/quotes/211347102/realtime BX:TMBMKDE-02Y +10.86% rose 13 basis points, to 0.27%.