General markets were expecting the ECB to increase their PEPP programme (pandemic emergency programme). The consensus from the market expected an increase by around EUR 500bn, however, the ECB actually increased this to EUR 600bn.

This move surprised market participants, why would the ECB increase the programme by an additional EUR 100bn?

Well, the answer may well just be that the ECB wants to make it clear that they can initiate QE (quantitative easing) more aggressively if need be. QE is the process of central banks printing money.

President Lagarde also addressed questions around the legal issues surrounding the PSPP (public sector purchase programme). German lawyers had previously ruled that the PSPP programme did not operate under EU laws. However President Lagarde said that the ECJ approved the PSPP programme (European Court of Justice) and that the German government can deal with this on their own.

This has increased risk appetite with the BTP/Bund yield spreads falling sharply. The BTP/Bund spreads represent Italy 10-year yields vs German 10-year yields. This spread is typically used as an indicator for market risk appetite, concerning the Eurozone.