ECB interest rates increase and put pressure on bonds

ECB interest rates put pressure on Italy’s bonds

Business News

Italy’s State bonds came under renewed pressure on Friday after the European Central Bank (ECB) announced on Thursday it was taking a hard line to combat high inflation. The ECB interest rates increased by 0.5%.

The ECB raised its interest rates by half a percentage point and said more hikes were coming.    It also said it would start a policy of quantitative tightening in March by each month offloading around 15 billion euros’ worth of the bonds it has acquired in recent years.

The yield on Italy’s 10-year BTP bond rose by 14 base points to 4.27% on Friday, having increased by 28.9 points on Thursday. That took the spread between the BTP and the German Bund up to 213 base points, compared to 206.7 at Thursday’s close.

Bourse dropped further on Friday

The Milan stock exchange’s FTSE Mib index lost 0.16% having shed 3.45% on Thursday.

Defence Minister Guido Crosetto criticised the central bank’s decisions, saying they had been taken without giving proper weight to the consequences. He also joked he did not understand the “Christmas gift” that ECB President Christine Lagarde had given Italy.

Infrastructure Minister and Deputy Premier Matteo Salvini said the ECB’s moves were “incredible, baffling and worrying”.

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