Despite Lagarde's Early Resignation Speculation, European Government Bond Yields Remain Stable

FT: "Considering Resignation Before Term Ends"
Market Sees Policy Rate Likely to Stay Unchanged This Year
Macron Seen Gaining Influence Over Successor Selection

Lagarde Christine, President of the European Central Bank (ECB) (right), and Macron Emmanuel, President of France. AP Yonhap News

Despite speculation about the early resignation of European Central Bank (ECB) President Christine Lagarde, the European government bond market remained stable. The prevailing view appears to be that there will be no major change in the ECB's monetary policy stance, which has kept the policy rate at around 2% since the second half of last year, even if the president is replaced.

According to CNBC in the United States on the 18th (local time), the yield on 10-year German government bonds (Bunds), the benchmark for eurozone bond yields, was trading at 2.74%, up 0.1 basis point (1bp = 0.01 percentage point) from the previous session during intraday trading. The yield on 2-year German bonds was also trading at 2.07%, up 1.7 basis points. The value of the euro against the dollar rose 0.06%, showing a slight strengthening.

It is interpreted that there was no significant market shock even immediately after rumors of Lagarde's early resignation emerged. German media outlet Deutsche Welle (DW) reported, "Bond yields and the euro moved very little in early trading," adding, "This indicates that investors do not expect a change in leadership to herald major policy changes."

Earlier, the Financial Times (FT) in the United Kingdom reported the previous day, citing sources, that Lagarde is considering stepping down before the end of her eight-year term, which is scheduled to run until October 2027. However, an ECB spokesperson stated on this matter, "President Lagarde is focused on her current work and has not decided whether to step down."

At its monetary policy meeting on February 5, the ECB kept its key interest rate unchanged at 2.15% per annum for the fifth consecutive time, maintaining a hawkish stance. The deposit facility rate (2.00%) and the marginal lending facility rate (2.40%) were also left unchanged. After cutting rates a total of eight times since June 2024, the ECB has maintained a freeze stance since the middle of last year.

Reuters reported that the market still expects no change in the outlook for a policy rate freeze this year. Ross Hutchison, head of eurozone market strategy at Zurich Insurance Group, said, "I do not see Lagarde's potential departure as significantly increasing market uncertainty," noting, "This is different from the days of former President Mario Draghi, when creative and unconventional policies were the hallmark." He added, "The ECB is currently in a good position. This reduces the risks associated with a change in leadership."

Meanwhile, some analysts say that Lagarde's consideration of early departure is intended to strengthen the hand of French President Emmanuel Macron in the process of selecting her successor. The FT explained that it is meant to allow President Macron to exert influence over the nomination of Lagarde's successor. Reuters pointed out that there are concerns that the process of choosing the next ECB president could become complicated if the far-right National Rally (RN) wins the French presidential election in the spring of 2027.

This content was produced with the assistance of AI translation services.