The European Central Bank announced an unscheduled monetary policy meeting for Wednesday, at a time when bond yields are surging for many governments across the euro zone.
“They will have an ad hoc meeting to discuss current market conditions,” a spokesperson for the central bank told CNBC.
Borrowing costs for many governments have risen in recent days. In fact, a measure known as Europe’s fear gauge has hit its highest level since early 2020. The difference in Italian and German bond yields — widely watched among investors — widened the most since early 2020 earlier on Wednesday.
The yield on the 10-year Italian government bond also crossed the 4% mark earlier in the week.
The moves in the bond market, which highlighted nervousness among investors, were linked to concerns that the central bank will be tightening monetary policy more aggressively than previously expected.
At the same time, the ECB failed last week to provide any details about potential measures to support highly-indebted nations, which fueled concerns among the investment community even further.
However, in the wake of Wednesday’s announcement, bond yields have come down and the euro moved higher against the U.S. dollar. The euro traded 0.7% up at $1.04 ahead of the market open in Europe.
The market reaction so far suggests that some market players are expecting the ECB to address concerns over financial fragmentation and indeed provide some clarity about what sort of measures it might take to support highly indebted nations.
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