The ECB meets urgently today after the risk premiums of the countries of southern Europe have skyrocketed
The
European Central Bank (ECB)
has decided at its emergency meeting held this Wednesday
to reinvest the debt securities
acquired within the framework of its post-pandemic debt purchase program (
PEPP
) in a
flexible
way in order to be able to
acquire more debt from the countries of southern Europe
and thus put downward pressure on the yield of the bonds of countries such as Spain or Italy, thus containing their risk premium.
"The Governing Council has decided that it
will apply flexibility in the reinvestment of reimbursements
due in the
PEPP
portfolio , in order to preserve the functioning of the monetary policy transmission mechanism, a precondition for the ECB to be able to fulfill its mandate of price stability", he announced in a very brief statement published at the end of the meeting, in which he did not give more details.
In addition, it has given a mandate to the Eurosystem Committees and the different ECB bodies to "accelerate the finalization of the design of a
new anti-fragmentation instrument,
which will be submitted for consideration by the Governing Council".
This new instrument will be the one that serves to avoid a large disparity between the yields required for the bonds of different countries and, as expected,
it has not yet been designed or agreed upon
given the differences within the Council itself.
In the statement, of just
two paragraphs
, the ECB has explained that "since the gradual process of policy normalization began in December 2021, the Governing Council
has committed to act against the resurgence of the risks of fragmentation
The pandemic has left lasting vulnerabilities in the eurozone economy that are, in fact, contributing to the uneven transmission of our monetary policy normalization across jurisdictions."
The
ten-year Spanish bond yield
had fallen below 3% this morning and the risk premium had fallen from the level of 136 basis points where it stood yesterday to around 128 points with confidence in this meeting.
Now,
it will be necessary to see if the agreed measure, of which no details have been given, is enough
to keep the markets calm.
"This move alone
will likely disappoint
the market as
the size of maturing assets is too small
compared to the potential need to stabilize markets. The same would likely be any further adjustment of existing policy tools." , the British consulting firm
Capital Economics warned this morning.
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Articles Alejandra Olcese
Articles Alejandra Olcese
Articles Alejandra Olcese
Articles Alejandra Olcese