ECB Rate Hike Bets Slashed as Euro-Area Bond Spreads Slow

A surge in euro-area sovereign bond spreads slowed on Friday as traders bet that the European Central Bank will be forced to support the region's more-indebted members by delivering fewer interest-rate hikes.

Traders are starting to factor in the impact of surging borrowing costs in the region's periphery on the bloc's economy, leading them to aggressively trim back their bets on the scope for interest-rate increases from the ECB.

The money markets now price between two and three hikes by the end of next year, down from four fully priced earlier this week. This shift reflects growing concerns about the economic impact of rising borrowing costs in the region's periphery.