It has been known for a long time that silver was a natural antibiotic, and since silvered steel was intended for use in medical instruments this is likely the reason.

Silver is still used for this purpose today - it is sometimes added to antibiotic cremes, and I've seen silver gauze used during surgeries (mostly cranial surgeries) to protect exposed tissue from infection during the surgery.

Then there was that idiot in Montana that was running for senator a few years ago, that had taken colloidal silver in the runup to Y2K thinking it would keep him healthy after civilization collapsed. Maybe it yet will, but mostly it just turned him into a smurf.