The ECB said: “The Governing Council will hold an ad hoc meeting on Wednesday to discuss current market conditions.” The meeting is scheduled to begin at 11 a.m. CET. The move, which comes less than a week after the last board vote on interest rates, has boosted investor expectations that the central bank is preparing to announce a policy instrument to avert another debt crisis in the region. Italian government bonds rose in price after the news of the scheduled meeting, reversing part of the recent sell-off, which analysts say brought the country’s borrowing costs to the “danger zone”. Gilles Moec, chief economist at Axa, an insurance company, told the ECB that “the stakes are high” for the ECB “now that everyone is dusting off their debt sustainability spreadsheets for Italy, they probably need to go one step further”. Yields on 10-year Italian government bonds fell about 0.2 percentage points in volatile early trading on Wednesday to about 3.98%, according to Tradeweb. It had risen to almost 4.2 percent in the previous session from just over 1 percent at the end of 2021. The eurozone central bank disappointed investors last Thursday with a lack of detail on when and how to intervene in government bond markets to tackle so-called financial fragmentation, which has boosted borrowing costs for Europe’s most vulnerable countries. what about their northern neighbors. . Moec said investors would expect the ECB to “at least say it is launching a new instrument” and provide more details on how to use the flexibility to reinvest bond maturing to deal with the fragmentation in eurozone bond markets. The gap between the cost of borrowing in Italy and Germany widened to 2.4 percentage points, double that of last year, and widened to about 2 percentage points before last week’s ECB meeting, when interest rate regulators signaled the end of extremely loose monetary policy. announcing plans to stop buying more bonds and start raising interest rates. The euro reversed some of its losses, rising 0.6 percent against the dollar to $ 1,047 early Wednesday after the ECB announced on news networks. Shares of European banks also moved higher on Wednesday. The Euro Stoxx Banks index rose 3.7% with major Italian lenders UniCredit and Intesa Sanpaolo jumping more than 6%. The meeting comes ahead of the Federal Reserve’s monetary policy decision on Wednesday, when the US Federal Reserve is expected to raise interest rates by 0.75 percentage points. ECB Executive Board member Isabel Schnabel said in a speech Tuesday afternoon that the central bank was close to intervening in bond markets, saying “some borrowers have seen significantly greater changes in financing conditions than others. beginning of the year “.

He added: “Such changes in financing conditions may be a reduction in the transmission of monetary policy that requires close monitoring.” Schnabel, the ECB executive who oversees its market operations and one of the most prominent voices on its board, said the central bank’s commitment to the euro knew no bounds. “And our history of intervening when needed supports this commitment,” he added. Analysts estimate that the ECB already had an additional € 200 billion to spend on heavy public debt by promoting some government investment reinvestments that last up to a year. The last time the ECB convened an unscheduled board meeting was at the start of the coronavirus pandemic in March 2020, when it launched a massive bond market plan to tackle the sharp sell-off in bonds of the eurozone’s most vulnerable countries, such as Italy. ECB President Christine Lagarde plans to continue her trip to the United Kingdom on Wednesday afternoon to receive an honorary degree from the London School of Economics, where she will speak at an event.