March 12, 2020 / 1:10 PM / 4 months ago

Euro, bonds, stocks sell off after ECB steps up easing

LONDON, March 12 (Reuters) - The euro weakened, Italian bond yields jumped and stocks tumbled on Thursday after the European Central Bank unveiled a package of easing measures in the face of the coronavirus outbreak.

The ECB said it would offer fresh loans to banks, offer previously agreed liquidity facilities at even more favourable rates and it would temporarily increase assets purchases to help the economy cope. But it disappointed markets by keeping interest rates unchanged.

The euro briefly rose into positive territory, but soon gave up its gains to trade down 0.4% at $1.12050.

Two-year German bond yields, which had fallen back below -1% ahead of the easing steps, rose 5 basis points to -0.91% , while Italian 10-year bond yields jumped more than 20 bps.

The euro zone stocks index touched its lowest level since June 2012. Euro zone banking index and the wider euro STOXX indexes extended their losses, both down 8.2%.

The iTraxx European crossover CDS index, a gauge of the cost of insuring against defaults by junk debt issuers, jumped over 45 basis points to as high as 585 bps, according to Tradeweb pricing. (Reporting by the London Markets Team, editing by Karin Strohecker)

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