ECB President Lagarde said today that the European Central Bank is closely monitoring nominal yields on long-term bonds. In this way, the bank wants to support all sectors of the economy by providing favorable financing conditions - despite the fact that yields in the euro area are at record low levels. The reaction on the European debt market was immediate - the yields of bonds from the Old Continent began to decline (and their prices to rise). This event can therefore be considered an important verbal intervention by the ECB. On the currency market, and more specifically on the EURUSD pair, we could initially see a weaker euro (drop below 1.2140), but the move was quickly negated and the price rose above 1.2150 level.
The statement of President Lagarde was made due to the rising inflation expectations in the US, which contributes to the dynamically rising yields on US bonds. Yields on 10-year bonds at some point increased to around 1.40%, which continues to put pressure on the equity markets. The main US indices opened lower today and if this situation continues until the close of the day, the S&P 500 may end the 5th session in a row lower. It is worth emphasizing that, after Lagarde's words, the yields on 10-year US bonds also started to decline.
Bund prices soared after the words of the ECB president Lagarde - thus their yields fell. Source: xStation5