The ECB will be more flexible in buying debt.Accelerate new crisis response tools-duty

The European Central Bank (ECB) will take steps to stop the turmoil in the European bond market. After Wednesday’s emergency meeting, financial authorities announced that they would buy debt more flexibly and speed up the implementation of new “fragmentation prevention” measures.

“The Board has decided to apply flexibility to the expected redemption reinvestment of the PEPP portfolio in order to maintain the functioning of the monetary policy transmission mechanism, which the ECB can accomplish its mission. Prerequisites for price stability, “said the Central Bank in a statement.

Pandemic Emergency Procurement Program (PEPP) envelopes € 1.85 billion to buy public and private debt from the euro area to try to stop the pandemic impact on the economy. The net purchase ended in March and the amount reinvestment phase is underway. These are the values ​​that the ECB wants to use in a targeted way.
In addition to this measure, policymakers also decided to “mandatory the relevant Eurosystem Commission along with ECB services to accelerate the completion of the design of new anti-fragmentation measures for consideration by the Board.” Did.

The ECB’s announcement will be made when investors are witnessing general sold-outs in major global markets and a significant rise in interest rates on eurozone sovereign debt when markets are experiencing turmoil. ..

As the central bank itself is aware, in a statement released this Wednesday, “ The pandemic leaves a lasting vulnerability in the eurozone economy and, in fact, contributes to the uneven transmission of monetary policy normalization across different jurisdictions.

Thus, “Since the phased process of monetary policy normalization began in December 2021, the Board has promised to act to counter the risk of a resurgence of fragmentation.”

At a press conference after the two ECB meetings in April and last week, financial authority Governor Christine Lagarde said, “The ECB has a means to combat fragmentation and will implement new tools as needed.” I was emphasizing. He also emphasized the need to adopt flexibility as needed.

In April, ECB governors faced by journalists facing rising prices and yields in the euro area already recalled that “flexibility has helped us” in the past, and inflation and worsening debt rates are financial. It was one of the possibilities of the authorities.

At a previous meeting, ECB policymakers pointed out a 25 basis point rise in interest rates already in July, opening the door to a significant rise in September and making a net purchase from the regular acquisition program (APP). Also confirmed that will end in July.

After the monetary authorities issued this statement, interest rates on eurozone sovereign debt were significantly eased and major European markets strengthened.

The 10-year German Bund yield, which is the benchmark for the region, is 1.609% after deducting 13.6 basis points. Interest on Italy’s debt with the same maturity recorded one of the most important bailouts in the euro area, down 36 basis points to 3.804%, while Greece’s debt yield fell 42 points. It remained at 4.248%. Similarly, Portugal’s 10-year debt yield followed this trend, easing 24.7 basis points to 2.844%, the largest decline since March this year.

In the stock market, major European markets, excluding Lisbon, gained strength, accounting for more than 1%. The European benchmark Stoxx600 has increased by a total of 1.20%, Spain’s IBEX has increased by 1.24%, and Germany’s DAX has increased by 1.25%. London will grow 1.20%, Amsterdam will rise 1.25% and Milan will rise 2.38%. The PSI value is only 0.67%.

(The news was updated in response to the market at 14:04).

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