The yield on the 10-year United States Treasury note, which was at 2.12 percent on Monday, had risen to 2.27 percent on Thursday. (Bond yields and prices move in opposite directions.)
A sign of the state of investors’ nerves was an intraday spike in the index known as Wall Street’s fear gauge, the VIX, which jumped 51 percent, before ending the day up 14 percent.
In his remarks, Mr. Draghi highlighted the success of European Central Bank policies in increasing jobs, spurring growth and stopping deflation.
But in calling for prudence in policy, Mr. Draghi — who, more than any other central banker, is known for his judicious choice of words — sparked an immediate sell-off in European government bonds as investors interpreted his use of the word “prudence” as a stepping away from the bank’s commitment to keep buying European government bonds.
Taken aback by the rout, central bank officials quickly said that the speech should not be seen as a statement by Mr. Draghi that he would tighten policy immediately, but investors paid them little heed.
“Central bankers are saying that economies are doing well enough and conditions are loose enough that we do not need to press the pedal to the metal anymore,” said Michel Del Buono, global strategist for Makena, an investment firm that caters to foundations and endowments. “But many investors are still thinking that they will be doing the maximum forever.”
It is not just the European Central Bank that has, fairly abruptly, signaled a change in direction.
Mark Carney, the governor of the Bank of England, another central banker known for dovish sympathies, said in a speech on Tuesday that an increase in rates might be in order just a month after he indicated that interest rates would remain low.
The pound and the yield on the British 10-year note surged afterward.
The swift sell-off in European stocks and bonds recalled the so-called taper tantrum in 2013, when the Federal Reserve first said it would begin to taper its policy of buying mortgages and other securities in an attempt to stimulate the economy.
Even though an actual rate increase was years away, stocks and bonds in emerging markets, long dependent on interest-rate sensitive capital flows, fell sharply in what would become a three-year bear market for the asset class.
That Mr. Draghi and Mr. Carney moved so quickly to signal this new approach has prompted analysts to speculate that there may be some form of coordination among central bankers to warn investors who have benefited from the liquidity boom.
Stock markets in the United States have hit highs and, for quite awhile, the interest rates on trillions of dollars’ worth of European government bonds dipped into negative territory as global investors piled into these securities, confident that the central bank would continue to buy.
In the last few weeks, some officials from the Federal Reserve have warned about overheated financial markets.
On Tuesday, for example, Janet L. Yellen, the Fed chairwoman, described stock market valuations as being “somewhat rich.” Her language did not carry the punch of “irrational exuberance,” Alan Greenspan’s phrase to refer to a runaway stock market in the late 1990s.
Nevertheless it did send a clear signal to many investors that the Fed, even though it has no official mandate to guide or influence financial markets, is watching for potential bubbles. And that, perhaps, it will consider overvalued stock and bond markets when weighing its next rate increase.
So in that sense, some analysts say, central bankers’ recent turn to a more conservative approach should not be seen as a surprise.
On Thursday, stocks in Paris fell 1.9 percent, while Frankfurt shares ended 1.8 percent lower. The iShares EZU exchange traded fund, a $9 billion fund that follows a broad basket of stocks in the eurozone, closed the day down 1.4 percent.
In the United States, the benchmark Standard & Poor’s 500-stock index ended down 0.86 percent — having recovered lost ground late in the day. The slump came even amid gains in big banks, which, having passed the Federal Reserve’s annual stress tests, announced they would pay their shareholders the largest dividends in nearly a decade.
Of the Dow Jones industrial average’s 30 members, only Goldman Sachs (up 0.9 percent) and JPMorgan Chase (up 1.48 percent) were positive for the day.
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