The appearance of European Central Bank President Mario Draghi on Thursday 20 July last, when he was expected to give details of a possible turnaround in the central bank’s current monetary policy, eventually had little repercussion.
He made no references to possible changes, either in conventional monetary policy (it seems that benchmark interest rates in the Eurozone will remain at -0.40% for this year at least) or in non-conventional monetary policy where no decisions had been taken, thus leaving the amounts devoted to monthly debt purchases unaltered and postponing any decision on this question until October at the very least.
Consequences of expansive monetary policy on German debt
With this, the annual yield delivered by long-term German government bonds (10-year maturities) pulled back and remained within a range after the strong upturn they experienced in June and at the beginning of July.
As we can observe at the graph below, investors might have begun to think that the European Central Bank could lower the pace of its monthly debt purchases in the short term.
We will hence be keeping an eye on the next ECB meeting in October to see if the annual yield delivered by long-term German government bonds manages to break through the upper limit of its range or not.
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