UPDATE 1-Euro rebounds, bond yields up after ECB reveals TLTRO details

(Updates with more details, quotes)
June 6 (Reuters) - The euro jumped half a percent on
Thursday, while bond yields and Italian bank shares rose after
the European Central Bank (ECB) held off hinting at interest
rate cuts and unveiled details of its cheap loans programme for
banks.
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 .
The euro zone banking stocks index .SX7E jumped 1.3%,
while the euro rebounded as much as 0.5%, 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 via its TLTRO programme.
But 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
Money market pricing showed that investors now price in
almost a 45% chance of a 10 basis point cut in ECB rates by the
end of the year, down from a 75% chance before the meeting.
ECBWATCH
Analysts said the most dovish outcomes had not materialised
and 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."
However, Italian banks rose 1.9% after the statement
.FTIT8300 , as investors scaled back expectations for an ECB
rate cut in the wake of the ECB statement.
Italian government bond yields were also higher on the day,
having fallen to two-month lows ahead of the ECB meeting.
Italy's 10-year government bond yields were two basis points
higher to a day's high of 2.506%.
Credit Suisse said banks were being offered funding at minus
30 bps. "This is not the most bullish outcome, but still
positive," it said.
Investors remain keenly trained on the outcome of Italy's
dispute with the European Union over its budget.
Bond yields rose sharply earlier in the week after the
European Commission concluded that Italy is in breach of EU
fiscal rules because of its growing debt, a situation that
justifies the launch of a disciplinary procedure.
Italy needs a big deficit correction for this year and next
to avert a European disciplinary procedure over its
deteriorating public finances, European Commission Vice
President Valdis Dombrovskis told La Repubblica daily on
Thursday.