Sovereign bond yields climbed on Thursday after the president of the European Central Bank beefed up her rhetoric to act against inflation, paving the way for a possible hike in key rates this year.
The situation has indeed changed, recognized Christine Lagarde during a press conference at the end of an ECB monetary policy meeting and we are going to use all the tools and options to respond to this situation.
Inflation in the euro zone is expected to remain high for longer than expected, but is expected to decline over the course of the year, Ms Lagarde said.
We must continue to monitor the situation based on the data and then we will have to make a decision, she added, believing that we will have more certainty when we meet in March.
So far, the ECB has ruled out a rate hike in 2022, comments that Christine Lagarde did not repeat this time.
The borrowing rates of the countries of the euro zone tightened significantly following this change in tone, reaching their highest since May or June 2020 for the yields of the countries of southern Europe.
The 10-year rate of Germany, which is a benchmark in Europe, climbed 0.13% around 2:35 p.m. GMT against 0.04% the day before on the secondary market where the debt already traded.
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For its part, the rate in France stretched to 0.55% (against 0.45%).
Similarly, the rate for Spain increased to 0.90% (against 0.79%), as did that of Italy to 1.55% (against 1.42%).
The ECB maintained its interest rates at historically low levels on Thursday.