A spread of over 200 bps in the 10-year Germany and Italy bond yield would be unjustified, European Central Bank (ECB) Governing Council member Ignazio Visco said on Thursday.

Additional takeaways

"Wage growth is contained so far."

"We're capable of sterilising liquidity without selling securities."

"Overly gradual monetary shift would compromise ECB credibility."

"Overly rapid policy normalisation would jeopardise financial stability."

"I think normalisation can continue to be gradual, it can mean 25 or 50 bps hikes."

"Fragmentation warrants concern."

"Spreads are not due to monetary policy normalisation."

"Today a spread of less than 150 bps would be justified, referring to Italy-Germany 10-year bond yield spread."

"Monetary policy normalisation and fighting fragmentation are complementary."

Market reaction

The EUR/USD pair extended its rebound after these comments and was last seen trading in positive territory above 1.0450.