• Regarding the bond market sell-off, a divergence of sorts has emerged between the ECB and now the Reserve Bank of Australia and the one hand and the Federal Reserve and the Bank of England on the other hand.
  • For example, the ECB has quite strongly verbally intervened in a partially successful attempt to limit increases in nominal and real bond yields. Last week, President Lagarde appeared to have drawn a line in the sand for the German 10y around minus 30bps, which translates to a real yield of around minus 1.5, which happens to be the pre-pandemic level. In the barrage of last week’s ECB-speak, last Friday the Greek Governing Council member Stournaras became was the first ECB-speaker to publicly call for increasing purchase volumes to stem the advance in yields. And this morning the RBA did just that, announcing it would buy AUD3 billion on longer dated bonds following an increase in shorter-dated bonds last week.

 

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