The European Central Bank’s decision makers demonstrated that it is too early to lower its emergency stimulus measures and that the euro zone government bonds have performed strongly.

The yield on German 10-year government bonds fell to minus 0.2% on Wednesday, offsetting the sharp rise earlier this month, when the market responded to the optimistic outlook for the euro zone economy.

The 10-year foreign debt yield, which serves as the benchmark for assets in the entire Eurozone, hit a two-year high of minus 0.07% a week ago. This increase reflects the decline in prices. At the same time, more and more investors are betting that the European Central Bank will reduce the monthly net bond purchases of 80 billion euros as soon as possible next month in response to improved economic forecasts.

However, since then, several senior ECB officials have stated that they believe it is too early to start withdrawing monetary stimulus measures.

The latest news is that Fabio Panetta, a member of the Executive Committee of the European Central Bank, said in an interview with the Nikkei Shimbun on Wednesday that “withdrawing policy support too early may choke the recovery before it becomes self-sustaining”.

Panetta said: “What we are seeing today does not justify reducing the speed of purchases.” He added that any discussion about the phasing out of the European Central Bank’s 185 million euro pandemic emergency procurement plan (PEPP) is “obviously It’s too early.”

The day after the presidents of the Greek and French central banks made similar remarks, his remarks pierced the market, and people increasingly believed that the European Central Bank would “shrink” its bond purchases next month.

Insight Investment global head of interest rates Gareth Colesmith (Gareth Colesmith) said: “The European Central Bank will obviously not cut interest rates in June.” “I hope they will first need to see strong economic data for a few more months.”

This week’s rally also boosted the bonds issued by debt-laden Eurozone member states like Italy. Compared with the earlier sell-off, the extra income or spread that must be paid by Rome and Germany’s debt has begun to widen, which may sound the alarm at the European Central Bank’s headquarters in Frankfurt.

Cole Smith said: “For them, the spread is worth paying attention to.” “Germany will have no problems with its own funds. [10-year borrowing costs of] Zero, but if Italy’s yields rise too fast, it will indeed pose a threat to recovery. ”

The most significant push against conservative “hawks” calling for a reduction in bond purchases came on Friday, when Christine Lagarde, President of the European Central Bank, stated that “it’s too early. Issues for debate”.

Last year, the European Central Bank twice expanded the size of the emergency bond purchase program, but less than half of the total expenditure of 185 million euros remaining under the PEPP. The company plans to maintain net purchases until at least March 2022 and only stop purchases after the pandemic crisis is over.

Recent business and consumer surveys indicate that after a double-dip recession began at the beginning of the year, the euro zone economy is expected to rebound strongly in the second quarter, and the European Central Bank may increase its growth and inflation expectations in June.

However, several board members of the European Central Bank told the Financial Times this week that there are still too many uncertainties to decide on the timetable for ending bond purchases under PEPP and requested that this discussion be postponed to September or even December. Month.

Richard Barwell, head of macro research at BNP Paribas Asset Management, said: “In terms of slowing down purchases, there is not even a debate.” “Paneta couldn’t be clearer – if you execute it seriously. Inflation order, then you’re fine with talking about gradual reduction.”

Compared with other Fed plans to withdraw from the pandemic stimulus program (such as the Fed and the Bank of England), the European Central Bank still faces long-term inflation expectations, far below its target of close to 2%.

Jacqui Douglas, chief European macro strategist at TD Securities, said: “They have missed the inflation target for a long time, and the market is more likely to shrink it prematurely as a mistake.”