ECB Tapped Traders’ Reaction to Greek Crisis in Unscheduled Call

The European Central Bank had impromptu phone conferences with its contacts in the bond and money markets at the start of the week to gauge the effect of the turmoil in Greece on the region’s fixed-income markets.

The ECB held the ad-hoc meetings on the first trading day after the Greek government called a referendum on whether to accept austerity proposals from creditors in exchange for more funding. Both groups said there had been relatively little contagion and expressed the need for future caution.

The yield on Italy’s 10-year bonds jumped as much as 57 basis points, or 0.57 percentage point, when markets opened on Monday, before paring more than half that move on optimism the ECB would be able to contain any fallout from the Greek crisis.

“Members described the bond market reaction as rather benign at the time of speaking,” the ECB said in the Bond Market Contact Group’s minutes, published on its website. Domestic “real money investors” saw wider yield premiums for “more stressed jurisdictions” as a buying opportunity, it said. “Other long-term investors like pension funds or insurance companies were also looking at opportunities to buy euro-area government bonds at higher yields.”

Near-term, the bond group said it didn’t expect the central bank to adjust its policy programs in reaction to the Greek saga. The money market group stressed the need for clearer communication about the rules for payments to and from Greek banks, which were closed at the weekend.

The bond group and the Money Market Contact Group are forums for ECB staff members to discuss the trading environment with investors and dealers.

It was the second ad-hoc phone conference of the bond market group this year, the first taking place in March to discuss the ECB’s quantitative-easing bond-purchase plan. Normally, meetings are held quarterly. Banks including Commerzbank AG, JPMorgan Chase & Co. and BNP Paribas SA are represented in the contact groups.

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