The speed of the recent European government bond market sell-off is worrying, a senior ECB rate setter said today.
But he added that overall the move was a normal correction as the more pessimistic growth and inflation assumptions were reversed.
European Central Bank Executive Board member Benoit Coeure said the bank's asset buying would rise slightly in May and June to account for lower market liquidity in the summer holidays in July and August - but not to counter the market sell-off.
The bank may also buy more assets in September to smooth out its transactions and keep the monthly average at €60 billion, he said.
"I do not see the recent reversal in the price of Bunds and other sovereign bonds as a cause for concern, insofar as it reflects a market correction," Coeure said in a closed-door speech yesterday that was published today.
"It is the rapidity of the reversal that worries me more. After several similar episodes, it is yet another incident of extreme volatility in global capital markets showing signs of reduced liquidity," he said.
The sell-off in euro zone bond markets over the last two weeks has been the sharpest since the euro's introduction.
Normally rock-solid 10-year German Bund yields have gone from near zero at the end of April to over 0.7% last week, an unexpected reversal as the ECB is buying €60 billion of assets per month as part of its quantitative easing programme.
Though the ECB could in theory lower its deposit rate further into negative territory from the current -0.2%, Coeure said he did not wish to remove the zero lower bound underpinning interest rates.