ECB plans to work on a new anti-fragmentation instrument

Upon shocking emergency meeting to address rising borrowing costs
ECB plans to work on a new anti-fragmentation instrument
President of the European Central Bank Christine Lagarde

The European Central Bank (ECB) has pledged to accelerate work on a “new anti-fragmentation instrument” to tackle surging borrowing costs in weaker eurozone economies.  

This comes following an ECB unexpected emergency meeting to address the high borrowing rates of many European governments. 

Bond yields have recently risen following the central bank’s regular meeting last week, during which the latter proposed a more aggressive tightening of policy but failed to introduce any new measures to support the bloc’s heavily indebted nations.

This raised some tension among money managers over financial fragmentation, which led to a bond yields increase.

The Italian 10-year bond yield crossed 4 percent earlier this week, prompting one economist to warn that such levels “could eventually turn into a problem” for the southern European country.

ECB executive board member Isabel Schnabel said on Tuesday “The central bank’s commitment to the euro to tackle financial fragmentation, had no limits. “And our track record of stepping in when needed backs up this commitment,” she added.

Bond yields in the eurozone fell on Wednesday morning following the unexpected announcement of an emergency meeting.

Meanwhile, the EURUSD rose on expectations that the ECB would take anti-fragmentation measures.