Spread, the ECB reassures: “Unlimited commitment in case of emergency”

After the strong sales on government bonds and the widening of the spread between the Bund and the BTP (which still rose to 250 basis points), the ECB tries to reassure the markets and cut the nails on speculation: the central bank will not tolerate price adjustments that undermine the transmission of monetary policy and is ready to rapidly deploy the tools at its disposal. The said member of the ECB board of directors, Isabel Schnabel, in a speech on the fragmentation of the euro area bond market, speaking to graduates of the Masters in Money, Banking, Finance and Insurance at the Sorbonne in Paris. At the end of the day, but before these words, the Bund / Btp spread widened again, to 250 basis points.

Stock markets down, BTPs under attack, the ECB corrects its rates and prepares the anti-spread challenge

by Tonia Mastrobuoni

June 13, 2022

“This commitment can be put into practice in a very short period of time if it is concluded that the transmission of policies is at risk – he said – In that case, reinvestments from maturing securities under the Pepp can be flexibly adjusted over time, in asset classes and in jurisdictions. ” ‘flexible allocation of reinvestments in Pepp is a way to address fragmentation, “our commitment is stronger than any specific tool“.

“Our commitment to the euro is our anti-fragmentation tool, this commitment has no limits – he strongly emphasized – and our track record of intervening when necessary confirms this commitment. “The toolbox is well stocked but other weapons could be added if necessary:” We will react to new emergencies with existing and potentially new tools – he concluded – These tools may still look different, with different conditions, duration and safeguards to stay firmly within our mandate. But there is no doubt that, if and when necessarywe can design and implement new tools to ensure the transmission of monetary policy and therefore our primary mandate of price stability “.