European Bonds Come Roaring Back on ECB’s Debt-Buying Bazooka

(Bloomberg) -- Sovereign bonds from Italy to Germany and France soared after the European Central Bank launched a $750 billion euro ($820 billion) debt-buying program to help insulate the region’s economy from the impact of the coronavirus.

Yields plummeted across the region -- even those on Greek securities, which are now eligible for purchases by the institution for the first time. The decision was made in an unscheduled meeting Wednesday evening, and marks a massive move to support markets from a body that many said had run out of ammunition.

European bonds have been in tumult through this month, lurching downward as traders struggled to find liquidity. Even German bonds, which typically rally during times of stress, slumped as governments primed spending plans to counter the growth shock from the virus outbreak.

“The ECB was forced to react quickly,” Christoph Rieger, head of fixed-rate strategy at Commerzbank AG, wrote in a note to clients. “The new envelope of 750 billion euros should help bring in spreads more lastingly, but it is questionable whether this will be the turning point of the broader financial market rout.”

German 10-year yields fell nine basis points to -0.33%, while those on Italian bonds plunged 106 basis points to 1.37%. Similar rates in Greece slid 45 basis points to 3.49%.

©2020 Bloomberg L.P.