Bond Traders Hunt for the Trigger of the ECB’s Anti-Crisis Tool
- ‘All eyes are now on the ECB’s tolerance for widening spreads’
- Italy yield premium is approaching the peak reached in June
The European Central Bank headquarters in Frankfurt, Germany.
Photographer: Alex Kraus/BloombergThis article is for subscribers only.
When a central bank sets a red line, the market will start looking for ways to test it. And now that the European Central Bank has unveiled the initial details of its anti-fragmentation tool, traders say the next step is to figure out what it takes to set it in motion.
They’re asking: How wide do European spreads need to be? What are the conditions for policymakers to start supporting bond markets, and to what extent does Italy’s own political chaos prevent the ECB from taking action?