U.S. Markets

ECB ready to rein in bond spreads, beef up purchases - Panetta

FRANKFURT (Reuters) - The European Central Bank is ready to rein in “unjustified” spreads between euro zone bond yields and even to beef up purchases to combat the fallout from the coronavirus, board member Fabio Panetta said in an interview published on Sunday.

It was the latest move in a concerted rearguard action by the ECB since President Christine Lagarde upset investors and fellow policymakers on Thursday by saying it wasn’t the bank’s job to help virus-stricken countries such as Italy on the debt market.

“The turbulence that struck the Italian sovereign bond market in the last few days is an undesired event that must be reabsorbed,” Panetta, himself an Italian, told Milan-based daily Corriere della Sera.

“Strong, unjustified increases in the spreads on the back of the health emergency ... will be resolutely tackled.”

The ECB said it would buy an extra 120 billion euros ($133 billion) worth of bonds by the end of the year in response to the pandemic, on top of the 20 billion euros it buys every month to support inflation in the euro zone.

But Panetta said the additional purchases could be increased again and even opened the door to lending to financial intermediaries other than banks if needed.

“Liquidity strains could emerge among non-bank intermediaries,” Panetta said in the interview.

“If it becomes necessary to carry out our monetary policy or preserve financial stability, the Governing Council could consider if and how to broaden the number of intermediaries it supplies liquidity to.”

Reporting By Francesco Canepa; Editing by Frances Kerry and Edmund Blair