- Reinvestments will skew
- Design a new tool
- Disappointed markets
- Lagarde will speak at 1620 GMT
FRANKFURT / MILAN, June 15 (Reuters) – European Central Bank unveiled new measures on Wednesday to ease the market crash that has fueled fears of a new debt crisis on the southern outskirts of the bloc, but some appear to have disappointed investors looking for a more decisive solution. not.
Government bond yields have skyrocketed on the periphery of the 19-currency currency bloc since the ECB last Thursday unveiled plans to raise interest rates in July and September to control painfully high inflation that it runs the risk of becoming entrenched.
The sale was aggravated by the absence of any specific ECB plan to limit this increase in borrowing costs, which raised fears that policymakers were too complacent about the situation of more indebted nations, such as Italy. Spain and Greece.
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Faced with the threat of a repeat of the debt crisis that nearly knocked down the single currency a decade ago, the ECB said it would be flexible in reinvesting cash with the maturity of its debt support program. pandemic of 1.7 trillion euros (1.8 trillion dollars) recently completed and would be considered a new instrument designed by staff.
“The Governing Council decided to instruct the relevant Eurosystem committees together with the ECB services to expedite the completion of the design of a new anti-fragmentation instrument for consideration by the Governing Council,” the ECB said after an extraordinary meeting.
Investors seemed less than satisfied as they expected more decisive steps and more details.
The euro fell about a half percent against the dollar after the ECB statement, while Italian yields rose about 7 basis points.
Meanwhile, the spread between 10-year Italian and German bonds, a key indicator, widened to 239 basis points from about 224 before the announcement.
“That’s what they should have said last week. Better a week later than ever,” said Pictet Wealth Management economist Frederik Ducrozet. next meeting. “
Italian spreads peaked around 250 basis points on Tuesday, the highest since early 2014, raising concerns that Italy’s high level of indebtedness could become unsustainable.
Although there is no universally accepted level for this spread, Carlo Messina, CEO of Intesa, Italy’s largest bank, said earlier on Wednesday that the country’s economic fundamentals would justify between 100 and 150 basis points. .
Meanwhile, the 10-year Spanish bond spread has widened to 128 basis points since the ECB’s announcement of about 125, while for Greece it rose to 269 basis points from 260.
ECB President Christine Lagarde is due to speak at 4.20pm GMT in London on a pre-scheduled engagement. ECB board member Fabio Panetta will also speak at 13.15 GMT, although his speech will be about a digital euro. Both are expected to answer questions.
($ 1 = $ 0.9542)
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Report by Balazs Koranyi, Francesco Canepa and Frank Siebelt; Editing by Jacqueline Wong, Sam Holmes, Carmel Crimmins and Tomasz Janowski
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