Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

ECB still in wait-and-see mode as yields rise

EconomyFeb 26, 2021 04:45AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Executive Board member of the European Central Bank Philip Lane attends the Fortune Global Forum in Paris

FRANKFURT (Reuters) - The European Central Bank is monitoring the recent surge in government borrowing costs but will not target specific levels in bond yields or mechanically react to market moves, two ECB policymakers said on Friday.

Government bond yields around the world have rebounded from some of their lowest levels in history in recent weeks, mostly reflecting expectations of faster price growth in the United States.

Investors have been pondering at what point the ECB will increase the pace of its bond purchases to rein in yields, in keeping with its pledge to maintain financing conditions favourable for pandemic-stricken governments, companies and households.

Verbal intervention by ECB President Christine Lagarde last week failed to stem the bond selloff. Then Chief Economist Philip Lane's and fellow board member Isabel Schnabel tried to calm investor nerves. But both inserted caveats in their messages.

"At this stage, an excessive tightening in yields would be inconsistent with fighting the pandemic shock to the inflation path," Lane said in an interview with Expansión.

"But at the same time, it is crystal clear that we are not engaged in yield curve control, in the sense that we want to keep a particular yield constant".

Lane added that while inflation was indeed recovering, the increase was not yet what the ECB was looking for after a decade of undershooting its target.

Ten-year Bund yields, a key benchmark for the 19-country euro zone, now yield -0.223%, up from around -0.60% at the start of the year.

Schnabel reaffirmed that higher long-term real yields, which are adjusted for inflation, in the early part of an economic recovery could choke growth and would warrant a reaction by the ECB.

But she said a gradual rise in bond yields would even be welcome if it reflected higher inflation expectations, showing the ECB's stimulus is working.

"For example, a rise in nominal yields that reflects an increase in inflation expectations is a welcome sign that the policy measures are bearing fruit," Schnabel said.

"Even gradual increases in real yields may not necessarily be a cause of concern if they reflect improving growth prospects."

ECB still in wait-and-see mode as yields rise
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email