Very long-dated bonds were in particularly high demand – a fact which resulted in a flattening of the yield curves. Yields on ten-year government bonds in both the US and Germany have fallen by around 60 basis points since the beginning of the year, due in part to the monetary policy decisions of the major central banks. For instance, the Bank of Japan’s decision in January to apply negative interest to central bank deposits took markets by surprise. In March, the ECB decided to further expand its asset purchase programme and took its deposit rate deeper into negative territory. In the same month, the US Federal Reserve signalled that interest rates were likely to rise less quickly than originally anticipated. Yields on the ten-year government bonds of some highly rated countries like Switzerland and Germany touched new lows in June. In Switzerland, for example, the yield on ten-year Confederation bonds fell to –0.5%. Most recently, they have been trading around 40 basis points lower than at the beginning of the year. More than 90% of outstanding Confederation bonds are currently negative yielding (slide 2). However, Switzerland is certainly not the only country witnessing this scenario, which has now become a global phenomenon; some 17 states are currently reporting sub-zero yields on government bonds and, overall, more than a quarter of government bonds outstanding worldwide are trading at negative yields. On the foreign exchange markets, the US dollar and pound sterling have depreciated on a trade-weighted basis since the beginning of the year (slide 3).
All these regulatory developments, combined with changes to pillar II capital requirement amounts, could lead to over-calibration: each individual decision may be warranted; but their somewhat disorderly accumulation is not. And naturally, in setting these requirements, we must not jeopardise the level playing field between euro area banks and their international competitors. -  Third, consistency in the interaction between authorities, which should be improved: the case of Banco Popular in Spain, although it was resolved satisfactorily, also demonstrated the importance of swift and close cooperation between supervisory and resolution authorities, both at European and national levels. There is no denying that there is still a need to better coordinate the roles of the different European authorities – the SSM and ECB, the SRM, the Commission, and the European Banking Authority – in order to have a more clearly established “pilot in the plane” for crisis management. We still need to define the roles in order to decompartmentalise the different pillars and guarantee a continuum, which is vital to the smooth running of operations. But we must give our unequivocal support to these authorities in the performance of their duties: when the SSM, chaired by Danièle Nouy, and the ECB propose standards for the provisioning of new non-performing loans, they are operating fully within their remit to prevent future crises and ensure the convergence within the euro area that is at the heart of the Banking Union.