'They Can Test Us as Much as They Want,' ECB's Lagarde Warns Investors as German 10Y Yield Rises

March 31, 2021 6:26 AM EDT

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The German 10-year yield is up 8 basis points today to trade at negative 0.274. The benchmark 10-year yield is now up 73 basis points this week to record the second-best week in 2021 as it closes on this year’s high of negative 0.227%.

German bond yields are trading higher despite a strong warning from the ECB’s head Christine Lagarde, who told Bloomberg that markets can “test us as much as they want.”

“We have exceptional circumstances to deal with at the moment and we have exceptional tools to use at the moment, and a battery of those. We will use them as and when needed in order to deliver on our mandate and deliver on our pledge to the economy.”

“Given the exceptional situation that we are facing we are using maximum flexibility” with the 1.85 trillion-euro program, Lagarde said. “We will deploy all of it or not, or more and we will certainly adjust as needed.”

ECB’s projections are calling for a rise in the Eurozone’s economy by 4% this year, which is much lower than for the US. At this rate, the single market is likely to return to its pre-pandemic size in mid-2022, a year after the US.

The inflation data showed that consumer prices rose 1.3% in March, still below ECB’s goal of 2%.

“We have an economic situation overall which in this part of the world, Europe, is really marked by uncertainty. What monetary policy has to do and what the ECB has to do is to provide as much certainty as possible,” Lagarde added.

Despite rising German bond yields, the benchmark index DAX 30 is trading at a record high above 15,000.

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