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MNI BRIEF: ECB To Counter Bond Market Risk, Build New Tool

(MNI) London
(MNI) London
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Reinvestments from the principal payments of the European Central Bank’s pandemic emergency purchase programme, PEPP, will be applied flexibly to counter resurgent euro area fragmentation risks, the Governing Council said in a statement following Wednesday’s ad-hoc meeting, with existing work on designing a new anti-fragmentation tool to be accelerated.

The statement clearly linked recent widening of spreads with “lasting vulnerabilities” left behind by the Covid-19 pandemic, a move that will help the ECB to address any legal concerns that may arise, while emphasising it’s proportionality (see: MNI INTERVIEW: ECB To Overcome Obstacles To New Crisis Tool). However no indication was given by the central bank as to whether bond buying will be front-loaded was given, or how existing tools aside from PEPP could be adapted.

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Reinvestments from the principal payments of the European Central Bank’s pandemic emergency purchase programme, PEPP, will be applied flexibly to counter resurgent euro area fragmentation risks, the Governing Council said in a statement following Wednesday’s ad-hoc meeting, with existing work on designing a new anti-fragmentation tool to be accelerated.

The statement clearly linked recent widening of spreads with “lasting vulnerabilities” left behind by the Covid-19 pandemic, a move that will help the ECB to address any legal concerns that may arise, while emphasising it’s proportionality (see: MNI INTERVIEW: ECB To Overcome Obstacles To New Crisis Tool). However no indication was given by the central bank as to whether bond buying will be front-loaded was given, or how existing tools aside from PEPP could be adapted.