The recent European government bond market selloff was a normal correction but the rapidity of the adjustment is worrisome and indicates "extreme volatility" in the market, Benoit Coeure, a member of the European Central Bank's Executive Board, said.
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The ECB, which is buying 60 billion euros ($67.3 billion) of assets per month as part of its quantitative easing programme, will "slightly" increase purchases in May and June due to low market liquidity in July and August, but these adjustments are unrelated to the bond market volatility, Coeure said in a closed-door speech delivered on Monday and published on Tuesday.
"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. "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.