sabine mauderer : the return of inflation - here to stay? speech ( virtual ) by dr sabine mauderer, member of the executive board of the deutsche bundesbank, at the derivatives forum frankfurt 2023, 22 march 2023. * * * 1. introduction ladies and gentlemen, it is a privilege for me to address such a distinguished audience here today. what do you expect when a board member of the bundesbank talks about inflation? you probably expect a firm view. we will see later if i can deliver on those expectations. but this is the easy part. when it comes to expected policy outcomes or the expected trajectory of prices for financial assets, things can get a lot more complicated. take a look at markets for derivatives like futures, swaps, or options. they indicate that the distribution of plausible outcomes in markets has widened substantially of late. implied volatility in bond markets has spiked higher. we call this uncertainty. 2. recent developments in the financial system you will probably agree that recent events are not making our jobs – either yours or mine – any easier. the collapse of silicon valley bank and worries about credit suisse have sent ripples through financial markets. government bonds and bank debt went on a rollercoaster ride, after stress in parts of the us banking system triggered bouts of safe haven flows. yes, volatility has been high. market liquidity has suffered. but, overall, financial markets have continued to function. first, intermediation in unsecured and secured money markets has continued to work quite well. second, in government bond markets, there have been no signs of fragmentation in the euro area. third, the euro has been rather robust in currency markets. what is more, bank equity and debt have recovered some ground over the course of this week. let me add a few remarks on the euro area banking sector. i think we can all agree that the industry is in a much better position than it was 10 or 15 years ago. banks'capitalisation is much higher and stronger. their liquidity position is also much stronger. it is fair to say that the euro area banking sector is resilient ; and its regulatory framework is sound. 1 / 5 bis - central bankers'speeches this also includes a solid resolution framework to deal with situations where shareholders and creditors of a troubled bank have to bear losses. on this matter, i would also like to reiterate what the ecb, the srb and eba

, however, mainly concentrated in a few benchmark securities, particularly the 10 - year benchmark, and sdls are relatively less liquid than the g - secs, yielding typically 5075 basis points more than the g - secs in terms of yield at the 10 - year tenor. the average bid - ask spread for liquid securities in the g - sec market has remained less than a basis point during the last few years ( chart 3 ). strikingly, bid - ask spread as well as the price impact of trade for the 10 year indian g - sec benchmark are comparable to or lower than those for most of the advanced economies of the world including the us, the uk, france and germany ( chart 4 ). chart 2 : secondary market liquidity in terms of average daily volume 12. 0 8. 0 6. 0 g - sec ( including sdls and t - bills ) corporate bonds 2018 - 19 2017 - 18 2016 - 17 2015 - 16 2014 - 15 0. 7 2013 - 14 0. 4 2012 - 13 - 2. 6 2011 - 12 2. 0 2. 7 2. 5 2010 - 11 4. 0 5. 6 2009 - 10 usd billion 10. 0 equity volumes source : clearing corporation of india limited ( ccil ), securities and exchange board of india ( sebi ) there are several proximate drivers of this liquidity of the indian g - sec market : ( i ) regular issuance of the 10 - year benchmark has concentrated trading interest in this segment of the yield curve. efforts are now being made to regularise issuance of benchmark securities at shorter maturities ( 2 and 5 years ). ( ii ) secondary market transactions are predominantly ( around 80 % ) conducted in an anonymous electronic order matching system ( nds - om ) which is unique in the world for debt trading. while the remaining transactions happen over - the - counter ( otc ) outside the nds - om 4, they are nevertheless reported to the nds - om platform. ( iii ) near real - time dissemination of trade information publicly accessible on the website of the clearing corporation of india ( ccil ) ensures price transparency. ( iv ) settlement is guaranteed by the ccil and takes place through delivery versus payment ( dvp ) mechanism on t + 1 basis. guaranteed settlement implies there is no risk to investors from each other of delivery failures. ( v ) finally, enabling of short - selling facilitates a two - way interest adding to activity