European Central Bank Announces Emergency Meeting to Discuss Market Routine

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Christine Lagarde, President of the European Central Bank. The central bank has scheduled a last-minute meeting amid rising bond yields.

Daniel Roland | Afp | Getty Images

The European Central Bank announced an unscheduled monetary policy meeting on Wednesday, at a time when bond yields are rising for many euro-zone governments.

“They will have an ad hoc meeting to discuss current market conditions,” a central bank spokesman told CNBC.

In recent days, borrowing costs have risen for many governments. In fact, a measure known as Europe’s fear meter has reached its highest level since early 2020. The differential in Italian and German bond yields – widely watched by investors – widened the most since early 2020 earlier on Wednesday.

The yield on the 10-year Italian government bond also exceeded 4% earlier this week.

The bond market movements, which highlighted investor nervousness, were linked to concerns that the central bank will tighten monetary policy more aggressively than previously expected.

At the same time, the ECB failed to provide details last week on possible measures to support highly indebted countries, further fueling concerns among the investment community.

However, after Wednesday’s announcement, bond yields have fallen and the euro has appreciated against the US dollar. The euro was trading 0.7% higher at $1.04 ahead of market opening in Europe.

The market response so far suggests that some market players expect the ECB to allay concerns about financial fragmentation and indeed provide some clarity on what kind of measures it could take to support highly indebted countries.

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