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Financial News: Coeure Says ECB Stimulus Carries No Risk To

Coeure Says ECB Stimulus Carries No Risk To Financial Markets

04/03/2017 - 08:56:00 (RTTNews)

(RTTNews) - Functioning of euro area financial markets is not being hampered by the European Central Bank's massive stimulus and factors that are driving short-term bond yields to record lows are likely to be temporary, European Central Bank Executive Board member Benoit Coeure said Monday.

"So far we see no evidence that the current constellation of interest rates bears risks for the smooth functioning of markets, nor to financial stability or the transmission of our policy," Coeure said in a speech in Paris.

Factors such as the regulatory demand for safe assets are of a structural nature and can be expected to persist, he said. Others that led short-term bond yields to record lows are likely to be temporary, he added.

"In this regard, there is hope that the perceived political uncertainty, which has triggered flight-to-quality flows, will gradually dissipate and that investors re-balance their short-term fixed income again towards other bond markets," Coeure said.

The policymaker also noted that the reduction in ECB monthly asset purchases to EUR 60 billion from EUR 80 billion, starting Monday, will provide some relief.

However, increasing liquidity in the hands of investors without access to the deposit facility will continue creating demand for safe assets, Coeure said.

"For the time being, these factors are therefore likely to continue exerting a certain degree of downward pressure on short-term bond yields," he said.

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