Italian government bond yields fell as The European Central Bank held an emergency meeting To discuss the recent market turmoil.
The yield on Italian 10-year government bonds fell to 3.910% on Wednesday from 4.111% on Tuesday, according to Tradeweb. Bond yields fall as prices rise. Yesterday, Italy’s record borrowing costs hit their highest level since 2013.
The European Central Bank meeting was scheduled to begin at 5 a.m. ET, according to people familiar with the matter.
The central bank is under pressure to support southern European economies such as Italy, Spain and Greece, whose borrowing costs have risen as the European Central Bank prepares to ease its pandemic stimulus. Under this multi-trillion euro program, the European Central Bank has bought sovereign and corporate bonds, helping put an end to lending costs to governments, households and businesses.
Market volatility intensified after last week’s European Central Bank meeting, when it laid out plans to halt bond buying in the coming weeks and raise interest rates to contain rising inflation. The central bank disappointed investors by providing few details on how to prevent “fragmentation” within the bloc, as financially fragile member states such as Italy face tighter financial conditions than others.
“They probably didn’t anticipate how fast the markets could move,” said Carsten Brzeski, global head of macroeconomics at ING in Frankfurt. “This latest move from 3% to 4%. [yield on the Italian government bond]- It came so unexpectedly.”
A leading indicator of eurozone financial stress – the difference between the yield on benchmark 10-year German government bonds and the corresponding Italian government bonds – also eased, having climbed to its highest level since 2020 in recent days. That difference narrowed to 2.2 percentage points from 2.4 percentage points on Tuesday.
The euro jumped 0.7 percent to $1.0482.
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