The European Central Bank’s policy-making Governing Council will convene on Wednesday for a rare, unplanned meeting to discuss the upheaval in bond markets, reflecting government anxiety about a spike in borrowing prices for some eurozone countries.
Bond yields have increased dramatically since the ECB pledged a series of rate hikes last Thursday, with the yield differential between German bonds and those of more indebted southern states, particularly Italy, reaching a two-year high.
‘On Wednesday, the Governing Council will hold an ad hoc meeting to discuss current market conditions,’ an ECB spokesperson stated.
The meeting was scheduled for 0900 GMT, but it was unclear whether a statement would be issued, according to numerous persons with direct information.
Invitations to the meeting were distributed on Tuesday, and some policymakers who were scheduled to appear at a conference in Milan on Wednesday cancelled their appearances.
The Pandemic Emergency Purchase Programme, a 1.7 trillion euro ($1.78 trillion) bond-buying scheme that proved to be the ECB’s major tool during the COVID-19 pandemic, was launched the last time the ECB held an unscheduled meeting during market stress.
The ECB’s options for combating so-called fragmentation risk, which occurs when certain nations in the same currency union suffer significantly higher borrowing costs than others, include channelling reinvestments from maturing bonds into stressed markets or developing a completely new product. However, several analysts have warned that reinvestments alone are unlikely to be sufficient.
The meeting takes place on the same day as the United States Federal Reserve is scheduled to raise interest rates by 75 basis points, a shift in expectations that has fueled a furious sell-off throughout global markets.
The news of the ECB meeting pushed the euro up more than 0.5 percent to 1.0487 per dollar, 10-year Italian rates down 22 basis points, and Italian stock futures jumped strongly.
Post Your Comments