he European Central Bank kept interest rates unchanged on Thursday, but traders said the central bank has been buying bonds of peripheral euro-zone countries in an effort to keep rates lower.
German Bunds gained, while Italian and Spanish government bond yields rose in volatile trade on Thursday, after a euro- zone monetary source said the European Central Bank was only planning to buy Portuguese and Irish bonds. For more see [ID:nR1E7IF024].
Markets were unconvinced the ECB bond buying will be effective in stopping contagion and some were disappointed that Italian and Spanish bonds, whose yields climbed above 6 percent recently, were not the target of the purchases.
"It wasn't a unanimous decision to (buy bonds). (ECB President Jean-Claude) Trichet looked really uncomfortable saying it," one trader said.
"The market obviously dismissed it pretty rapidly," another trader said.
Brent fell more than 2 percent and U.S. crude lost 3.2 percent to $89 a barrel. Copper pricesdropped 1.5 percent. (Additional reporting by Julie Haviv, Marius Zaharia and Emelia Sithole-Matarise; Editing by James Dalgleish and Jan Paschal)
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