The ECB convenes an emergency meeting due to the increases in European risk premiums

Rosalia SanchezCONTINUE
Updated: 06/15/2022 09:51h
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yields of the debt bonds of several European countries, including Spain
, have risen sharply since the ECB promised last week a series of interest rate hikes that will take effect from July. The spread between the yields of Germany and the most indebted nations of the south, among which Italy undoubtedly stands out, has risen in a few days to its highest level in more than two years and the risk premiums are reaching peaks that we did not see, in the case of Spain, since 2014.

Christine Lagarde has considered it necessary to closely monitor this phenomenon and has summoned the members of the Governing Council to a meeting that will take place this morning in Frankfurt. "The Governing Council will have an ad-hoc meeting on Wednesday to discuss current market conditions," a spokesman reported.

The meeting was originally scheduled for nine o'clock this Wednesday morning, although the possibility of delays was considered if any of the members failed to arrive on time, given the urgency with which the call was made. Several of them have suspended at the last moment their participation in a conference in Milan that they had planned to attend. The communication office of the ECB does not clarify at the moment if there will be a public statement after the meeting.

The meeting comes on the same day that the US Federal Reserve is expected to raise interest rates again, possibly as much as 75 basis points, threatening a new tide in the markets. The euro rose more than half a percentage point against the dollar to 1.0487, while Italian 10-year yields fell 22 basis points and Italian stock futures rose sharply. This is in contrast to the performance of German 10-year yields, a benchmark for the 19-country currency union, which has reached 1.77%, its highest level since early 2014.

Isabel Schnabel, German and member of the ECB council, in addition to being responsible for market operations, declared yesterday that the European Central Bank is "closely" monitoring the situation and ready to implement new tools if it finds that the revaluation of the market is "disorderly". . "We will not tolerate changes in the financing conditions (of the euro countries) that go beyond the fundamental factors and that threaten the correct transmission of monetary policy," Schnabel guaranteed, adding that there are no limits to the commitment of the BCE to prevent fragmentation.

At this time,
the markets speculate on the possible measures that the ECB could activate to correct risk premiums
of the south and at the same time maintain the effectiveness against inflation of the rate hikes already decided. Schnabel has argued that, as a first line of defense, the ECB could deploy cash from maturing bonds in stressed markets and, if necessary, devise a new instrument. But at the same time, he spoke out against preemptively announcing a tool, since it would be necessary to adapt it to a particular situation with conditions, limits, and guarantees established on a case-by-case basis.

"Now we are talking. Just talking, but it's a start." For the markets, it is not enough. We should get a statement through the day that reflects a willingness to act and then maybe task committees get to work on options, this is what's been missing from last week after the announcement of the first two hikes rate”, requests fund manager Frederik Ducrozet.

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