At least temporarily, leading representatives of the European Central Bank (ECB) succeeded in dampening concerns about inflation in the markets and thus depressing interest rates on the bond market.

The yield on ten-year government bonds fell to minus 0.2 percent on Wednesday, after having hovered around minus 0.1 percent before the weekend of Pentecost.

The market for US government bonds also signaled easing.

Here the ten-year Treasury yield was 1.56 percent, almost 0.12 percentage points less than a week ago.

The yields of euro countries such as Italy, France and Spain also fell.

Markus Frühauf

Editor in business.

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    The French central bank governor François Villeroy de Galhau, who is a member of the ECB's monetary policy council, gave an important boost to the decline in interest rates.

    On Tuesday afternoon, he denied rumors of a possible tapering of bond purchases, thereby helping ECB President Christine Lagarde, who signaled further monetary policy support last Friday despite the economic recovery.

    Especially the highly indebted southern European countries such as Italy are interested in continuing the monthly purchases of government and corporate bonds as well as covered bonds with a volume of 80 billion euros.

    No tapering of bond purchases yet

    Lagarde intends to maintain the purchase volume until March 2022.

    At the beginning of April, the Dutch central bank governor Klaas Knot had indicated that the ECB could slowly reduce its bond purchases from the third quarter onwards in the course of the economic recovery.

    Villeroy now emphasized that the ECB had time well beyond the June 10 meeting to make a decision.

    On Wednesday, ECB director Fabio Panetta also opposed the demand for monetary tightening.

    There is no rush to curb bond purchases.

    The effects of the pandemic on inflation must be eliminated, and inflation must first rise again sustainably.

    A premature withdrawal of the monetary policy support carries the risk that the economic recovery will be stalled, warned Panetta.

    Representatives of the US Federal Reserve (Fed) also tried to dampen inflation worries. Fed Vice President Richard Clarida believes inflationary pressures are temporary. At the same time, due to the economic recovery, he sees the time approaching to start the discussion about tapering bond purchases. In his opinion, this could be the case at one of the meetings in the coming months. The head of the San Francisco Fed, Mary Daly, made it clear that the beginning of the discussion should not be equated with the turnaround in monetary policy.