The ECB’s exceptional move, with the announced anti-crisis plans, may not be enough to curb Eurozone speculation and the upward rush of the spread. With the real risk that the latter will point towards 300. This is highlighted by a comment on the subject by Filippo Diodovich, Senior Market Strategist of IG Italia.
“The extraordinary meeting of the Governing Council of the ECB tried to remedy the choices made in the meeting of the monetary committee in Amsterdam that had brought strong tensions on the bond markets of the peripheral countries of the euro area, especially on Italian bonds – highlighted the expert of IG – The solutions proposed by the extraordinary board still leave many uncertainties, given that the details of the plans are still missing. The flexibility of reinvestments within the PEPP program alone is not, in our opinion, sufficient to defend the most indebted countries in the middle term”.
“The solution that the ECB committees of experts will have to adopt will have to be very robust to completely eliminate the speculative appeal of the bonds of countries with higher debts and to avoid further risks to the financial stability of the Eurozone – continued Diodovich. Very complex solution because the new program should not hinder the ECB’s efforts to cope with inflationary pressures. ECB experts will therefore have to create an efficient plan that does not create additional liquidity in the system, capable of creating a shield to avoid fragmentation within the area euro. And the solution must be adopted as soon as possible because otherwise the relief on the trend of the spread will be only temporary and in a few weeks we could see a BTp – Bund spread towards 300 basis points “.