The bank supervisors are concerned about the price losses in the banks' bond portfolios.

However, bond prices have recovered significantly in recent weeks from their lows in mid-June.

This was associated with a significant drop in yields.

The price gains on ten-year Bunds have pushed yields down from 1.9 to less than 1.0 percent over the past six weeks.

On Tuesday, the yield, which is the reference interest rate for the euro area, was 0.931 percent.

Nevertheless, the fluctuations in the bond market are stronger than ever before.

In mid-December, the yield on the ten-year federal bond was still minus 0.4 percent.

Markus Fruehauf

Editor in Business.

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In addition to insurers, banks are important investors in the government bond markets.

The turnaround in interest rates on the bond market since the beginning of the year has been associated with significant price losses despite the recent recovery.

The supervisors of the European Central Bank (ECB) are now giving the issue top priority.

That's what Elizabeth McCaul, a member of the ECB's banking supervisory board, said in an interview with the "Börsen-Zeitung".

One of the weaknesses is the susceptibility to shocks in interest rates and corporate bond spreads.

"We are therefore conducting targeted reviews and are in close contact with the banks regarding their government bond holdings if necessary," said McCaul.

Accounting rules require banks to report losses on bonds immediately, even if they continue to hold these securities on their books.

These price declines are temporary and will not occur if the debt instruments are redeemed in full by borrowers when due.

Nevertheless, Italy's risk premiums are causing the ECB great concern, and it wants to contain them with an anti-fragmentation instrument.

After all, the Italian banks, which continue to struggle with comparatively high levels of bad debt, are very important investors for the Italian state.

The yield on the 10-year bond was 3.2 percent on Tuesday, well below the 4.2 percent when the ECB called a special council meeting on June 15 to discuss countermeasures.

However, the yield difference between Italy and Germany, currently 2.3 percentage points, is not far from the previous level of a good 2.4 percentage points.

The drop in yields on Bunds is more pronounced because investors are looking to them as a safe haven given the growing fears of a recession.

Italian government bonds hardly benefit from this in view of the high national debt.

The American Federal Reserve will announce its interest rate decision this Wednesday evening.

The market expects interest rates to rise by 0.75 percentage points to between 2.25 and 2.5 percent.

By the end of the year, Blerina Uruci, economist at American wealth manager T. Rowe Price, expects US interest rates to be between 3.75 and 4.0 percent.

The market expects the ECB to tighten further by around one percentage point by the end of the year.

The deposit rate would then be 1.0 percent.