Secondary market bond yields continue to rise as the ECB prepares the ground for “bold” interest rate hikes.

The minutes from the last meeting of the Board of Directors ECB show the Central Bank’s clear intention to continue raising interest rates beyond the impending March hike. After all, the head of the ECB, speaking today on Spanish television, stated that the ECB may have to continue its interest rate hikes beyond the planned 0.5% move at the March meeting.

As it turns out, it is not so much headline inflation in February that is the biggest concern for the ECB, but rather the more general risk that what started as supply-driven inflation could turn into demand-driven inflation. For this reason, the Central Bankers are trying in every way to prevent wage increases. However, data presented at the ECB board meeting held in Finland showed that after the rise in interest rates, businesses in the eurozone managed to increase their profit margins much more compared to the increase in production costs they faced.

As ING economic analysts estimate, the main reason for the aggressive policy adopted by the ECB on the interest rate front seems to be the risk of higher wage growth and the rigidity displayed by the inflation.

The debate over where the “ceiling” on interest rates might go has remained rather vague. The minutes state that “any estimate of the level of interest rates that could be considered overly restrictive was complex and uncertain,” although concerns about excessive monetary policy tightening were generally seen as premature at today’s high levels of inflation and in view of the likely persistence to underlying price pressures.

In the secondary market, in the Electronic Transaction System (HDAT) the volume of transactions was 64 million euros, of which 28 million euros related to purchase orders. The yield on the benchmark 10-year bond rose to 4.50% from 4.47% yesterday, versus 2.74% on the German counterpart, bringing the spread to 1.76% from 1.8% at yesterday’s close.

In the foreign exchange market, the euro is moving higher against the dollar today as the European currency traded at $1.0598 in the early afternoon from the level of $1.0603 that opened the market.

The indicative exchange rate euro/dollar. announced by the ECB stood at $1.0605.