There was plenty of hope when the ECB called for an emergency meeting earlier in the day, with European markets essentially looking like they were pricing in some form of new anti-fragmentation tool to be announced by the ECB.
Instead, they delivered a rather underwhelming statement related to reinvesting PEPP - which isn't the answer as pointed out earlier here - and said that they are looking into designing a new tool to deal with fragmentation risks.
The euro has seen its gains trimmed while Italian bond yields have crept higher, with 10-year yields up to 3.97% from 3.88% earlier. Meanwhile, Italian stocks have also pared some of its advance with the FTSE MIB now up by 1.9% as compared to the highs earlier when it was up by nearly 4%.
I don't see how reinvesting PEPP is meant to be a permanent fix and I'm sure markets will also look at it the same way. The ECB has mainly just applied a band aid to try and stop the bleeding for now but unless they come up with something fresh, I fear it is only a matter of time before we come back to the debt crisis issue in Europe again.
EUR
