By Andreas Kissler
BERLIN (Dow Jones)–According to an analysis by the German Institute for Economic Research (DIW), bond yields in the euro area have not developed so worryingly that the new emergency program of the European Central Bank (ECB) should be deployed. According to DIW information, the economist Kerstin Bernoth and the economist Gökhan Ider had examined on behalf of the European Parliament how bond yields in the first half of 2022 compared to the crisis year 2012 and the start of the euro zone developed and what factors drove the returns in each case.
On July 21, the ECB announced that it would specifically buy bonds from crisis countries if their yields rise unregulated, as they did in the 2012 euro financial crisis. “Although the yields on government bonds have risen in individual countries, so far they have been developing in line with the fundamental data of the respective euro countries,” explained Bernoth, deputy head of the DIW macroeconomics department. “Market exaggerations are not to be found.”
The ECB currently intends to activate the new instrument only when market irrationalities become apparent in individual countries, emphasized Ider. The development must be “disorganized and unjustified in relation to the economic and financial situation of a country”. “This has not been confirmed by the investigations with an estimation model,” explained the researcher. So far, it has been the increased general risk aversion and the respective national fundamentals that have explained the interest rate differentials.
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DJG/ank/smh
(END) Dow Jones Newswires
October 06, 2022 06:45 ET (10:45 GMT)
