Investing.com – Euro zone government bonds gathered hard on Wednesday, driving the distribution of results in all blocks lower, because the European central bank confirmed the report that they would hold a council meeting that was not scheduled to discuss new volatility.
The results on the Benchmark Bonds 10-Years of Italy fell 22 basis points to trade factions below 4%. It has increased above 4% for the first time since 2014 on Tuesday, because investors are uneasy about the first ECB interest rate increase in a decade. Euro, meanwhile, rose 0.5% to $ 1,0470.
It brought the distribution between the Italian and German benchmarks back to 324 base points, still an uncomfortable margin for ECB, who tried to ensure that the loan conditions throughout the currency union remained naturally uniform. Spread to other weaker economies around the outskirts of the Euro zones such as Portugal and Greece also widened sharply in the last few days, but followed the Italian leader behind the news.
Spread had begun to explode on Thursday after ECB President Christine Lagarde failed to provide details about what could be done to stop what he called “financial fragmentation.” Ahead of the ECB meeting, various reports have suggested that the ECB is working on an “anti-fragmentation tool.” Thus, the lack of details in the Thursday press conference emerged as disappointment.
Sales have been worse since Friday as overshoot in U.S. In May encourage investors to give prices on greater interest rates in the US as well. Federal Reserve is now expected to increase its main level by 75 basis points when announcing its policy decision at 14:00 ET (1800 GMT).
In his speech on Monday night, ECB Council member Isabel Schnabel had hinted that the ECB felt the need to improve its communication, because of new weaknesses in the U.S. Market. worsen the situation closer to the house.
“We will not tolerate changes in financing conditions that go beyond the fundamental factors and those that threaten the transmission of monetary policy,” Schnabel said.
However, he also failed to provide more appropriate details about what ECB was doing.
The Euro zone has faced two major episodes of stress in the last 10 years which threatened to force one or more members to come out of the currency union. First of the Euro 2010-2012 zone debt, effectively ended with a series of bailout funds by the government and with conditional promises for the purchase of unlimited bonds from the ECB President Mario Draghi. Secondly, at the beginning of Pandemi, handled by the same combination: the European Union expanded its ability to issue joint debts, while the ‘Emergency Purchase Program’ ECB for the first time explicitly provides the freedom to adjust the bonds of purchases to support each member state.
The ECB problem by taking a similar action this time is that with inflation running at the highest of all time of 8.5% in April, it has a far less scope to increase liquidity to the financial system.
“Details are needed to carry out this performance,” said Piet Christiansen, head of a fixed income strategy with Danske Bank, via Twitter, with attention to Bond Ribli on Wednesday.