The European Central Bank meets urgently this Wednesday due to the falls in the stock markets and the soaring Italian debt. That is, “to discuss current market conditions”, according to a bank spokesman quoted by Bloomberg. The announcement comes after Italy's 10-year bond yield rose above 4% for the first time since 2014 this week, signaling investors are unconvinced the ECB can raise costs. of indebtedness and maintain the bond yields of the most vulnerable members of the region at the same time.
The meeting takes place after the yields required of Italian or Spanish bonds have reached 2014 levels this week, above 4% in the case of ten-year transalpine debt and 3% in that of the Spanish.
However, the yield on the ten-year Spanish bond fell at the beginning of the session on Wednesday to 2.942%, after concluding the day on Tuesday at 3.098%. Likewise, the interest of the Italian bond to ten years also fell notably and stood at 3.972%, compared to 4.219% at the close on Tuesday.
The yield on the ten-year Spanish bond, which a year ago was 0.395% and which in December 2020 entered negative territory as a result of the ECB's intervention, has registered a strong increase since the end of last January before the shift in monetary policy by central banks in response to escalating inflation.
For its part, the German bond offered this Wednesday a return of 1.718%, reducing the risk premium of the equivalent Spanish debt to 123 basis points, after widely exceeding 130 basis points on Tuesday.
The German representative on the ECB board, Isabel Schnabel, stressed on Tuesday that the body will not "tolerate" a disorderly increase in risk premiums. "We are not going to tolerate changes in financing conditions that go beyond fundamental factors and that threaten the transmission of monetary policy," Schnabel said during her speech at an event in Paris, reports Europa Press.
Last week, the ECB announced that it intends to raise interest rates by a quarter point in July, ahead of a further hike in September to fight soaring inflation. The institution hasn't raised rates in more than a decade. The euro rose 0.6% to 1.0475 per dollar after the meeting announcement.
Indeed, the ECB announced last Thursday a first rate hike of 0.25 points in July, breaking the trend of the last decade, and the end of public debt purchases started at the beginning of the pandemic, given the escalation of prices reflected in record inflation figures in the eurozone. In any case, the ECB states in relation to the pandemic emergency purchase program (PEPP): “Net purchases under the PEPP could also be resumed, if necessary, to counter negative shocks related to the pandemic” .
"High inflation is a great challenge for everyone," said the Governing Council of the European Central Bank (ECB) last week, which stated that "it will ensure that inflation returns to its 2% target in the medium term."
“In May, inflation increased significantly again, mainly due to the increase in energy and food prices, also due to the impact of the war,” said the body chaired by Christine Lagarde: “But inflationary pressures have intensified , with a strong increase in the prices of many goods and services”.