A potential correction in financial markets is what keeps the European Central Bank's vice president awake at night, he said Thursday, discussing the ECB's recently released bi-annual financial stability report (FSR).
"The main risk in the FSR is a correction in financial markets, particularly in the bond market," Vitor Constancio told CNBC's Annette Weisbach in Frankfurt. And this would be "coming presumably from the U.S. where indeed the 10-year bond yields increased and are touching 3 percent," he said.
"That has consequences of course for the exchange rate of the dollar, which then impacts emerging markets. That is the main risk for financial stability worldwide, with consequences for (the) euro area too."
Yields on U.S. Treasury bonds have been steadily rising to multi-year highs in anticipation of interest rate hikes by the Federal Reserve as part of its policy normalization plans. Consequently the month of May has seen the U.S. dollar hit a series of 2018 highs, up 4.2 percent since the first quarter's end against a basket of six major currencies.