The recent rise in bond yields that has been driven mainly by concerns about rising inflation, and strong sell-offs that have shaken bonds, has worried central banks around the world. A continuing undesired increase in returns could have a significant impact on financial conditions.

Although central bank intervention seems to have caused a temporary de-escalation, investors estimate that the recovery of the global economy based on US support programs and fiscal stimulus will inevitably lead to rising inflation. In the Eurozone in particular, there is concern about a possible burst in borrowing costs, as government bond yields are used by banks as a benchmark for the cost of financing businesses and households.

However, the ECB, instead of increasing its weekly securities purchases, reduced them compared to previous weeks, at the lowest levels since the beginning of the year. According to the latest data, the central bank bought securities worth € 12 billion under the emergency PEPP program in the week ended 26 February, about € 5 billion lower than in the previous two weeks, when purchases amounted to 17.2 billion euros.

According to an ECB spokesman, this slowdown in weekly purchases is justified by the much higher securities repayments that expired.

Reactions to the ECB's inaction have prompted bank officials to pledge to do what is necessary to curb rising yields, stressing that the bank has the flexibility to deal with any undesired bond yield rise. In this context, analysts expect that next week ECB President Christine Lagarde will draw attention to the risk associated with unjustified increases in risk-free interest rates and government bond yields and signal a willingness to increase weekly purchases to mitigate the effects.