The European Central Bank is to hold an unscheduled meeting on Wednesday amid growing fears that turmoil in bond markets is causing big increases in the cost of government borrowing.
Bond yields – which indicate the price that governments must pay investors to borrow money – have risen sharply as central banks hike interest rates to contain a surge in living costs.
Rising debt interest repayments could hamper governments’ ability to provide financial help to households and businesses struggling with massive increases to fuel and energy costs.
“The Governing Council will have an ad-hoc meeting on Wednesday to discuss current market conditions,” an ECB spokespersontold Reuters.
Bond yields have risen sharply since the ECB announced its plan for rate hikes last Thursday.
The premium that some member states pay over the risk-free German 10-year bond has spread. Ten-year German yields currently sit at 1.77 percent, while Italian 10-year bonds are 240 basis points higher — the largest spread since early 2020.
Several eurozone nations are highly indebted, with debt piles equivalent to more than their entire annual economic output.
The cost of Covid support programmes has added to debt built up after the financial crisis that has yet to be paid down.
