As ECB officials reiterated over the weekend the need for monetary policy to remain restrictive, they said it was too early to declare a victory over inflation.。This led to a rise in euro zone sovereign bond yields on Monday (October 16), with inflation concerns back in the spotlight。

European Central Bank policy hawk Joachim Nagel said on Saturday that inflation remains too high, so monetary policy needs to limit economic output for the foreseeable future.。

European Central Bank President Christine Lagarde said that despite the economic environment is close to recession and has been a record series of interest rate hikes, but the euro zone labor market shows no signs of weakness。

German 10-year bond yields, the benchmark for euro zone sovereign bond yields, rose 4.5 BPS to 2.78%。The previous influx of safe-haven assets due to concerns about the Israeli-Palestinian conflict has led to a rise in German foreign debt yields in a matter of days from 2 on October 6..About 9% down to 2.About 70%。

But as oil prices rise, inflation fears start pushing bond yields higher again。At present, investors are closely watching whether the Palestinian-Israeli conflict has spread to other countries, and if the situation goes beyond imagination, it may further push up oil prices.。

Bostjan Vasle, governor of Slovenia's central bank, said the rise in bond yields showed that more and more investors believed that "interest rates will remain at a higher level for a longer period of time" to bring inflation back to its 2 percent target.。

Inflation is difficult to beat, leading to market expectations of a "rate cut" in the euro zone.。

Recently, the survey report showed that economists do not expect the European Central Bank to cut interest rates before September 2024.。In the previous round of surveys, respondents thought the ECB would cut interest rates in March and again in October.。The trend in the survey results suggests that the market is gradually accepting the signal that policymakers are struggling to send that there will be no premature rate cut。

ECB Governing Council member Martins Kazaks also recently said that the current economic forecast is not in line with the first half of 2024 rate cut。Hint no rate cut before first half 2024。

In addition, it is worth noting that the yield on Italian 10-year government bonds, the benchmark for the euro zone's peripheral countries, rose 5 basis points to 4 on Monday..81%。The spread between the Italian / German 10-year bond yield spread (BTP Spread) reached 202 basis points, which is considered a large measure of financial stability in the euro area.。On October 9, the index hit 209..2 basis points, the highest level in more than 10 months。

Some analysts believe BTP spreads could widen further at current levels。And if it continues to expand, it indicates that the economic recovery and inflation trends within the euro area are further differentiated.。This also complicates monetary policy considerations in the euro area, and it is not easy for the ECB to deal with this "fragmentation risk."。

Rainer Guntermann, interest rate strategist at Commerzbank, said: "Unless the ECB's comments become more cautious, BTP spreads are likely to move further upward, as today's (Italy) budget announcement is likely to confirm that its budget deficit will exceed 3% (of GDP) by 2025 before the S & P rating review.。"