European Central Bank (ECB) President Christine Lagarde told CNBC Thursday that her institution was "fully committed to avoid any fragmentation" in bond markets, walking back comments made earlier during a press conference in Frankfurt.
The ECB kept rates unchanged but unveiled a new round of stimulus in an attempt to limit the economic impact of the fast-spreading coronavirus.
Speaking in a press conference after the rate decision, Lagarde said she was "not here to close spreads" in regards to the sovereign debt markets. A spread refers to the difference in yields between two bonds from different euro zone governments. The spread between German and Italian yields, for example, is used as a fear gauge by market participants in times of financial stress.
The central bank has lent cash to governments across the euro area for the last decade in order to combat a debt crisis that began in 2011.
But her words cast doubt on whether the ECB would always provide that backstop, particularly for countries like Italy. Her initial words caused Italian bond yields to spike, and prices to briefly fall. Yields and prices move inversely to each other.
But speaking to CNBC after the press conference, Lagarde confirmed that the bank's policy tools meant there would be no fragmentation.
"We will use our tools including the asset purchase program, deviating temporarily from the capital keys if necessary, in order to support the euro area and avoid any dislocation risk. There's no question in my mind that we should be doing that," she told CNBC's Annette Weisbach in Frankfurt.
"We have the tools to fight that fragmentation, absolutely, and we will use them," she said, later adding the bank was "fully committed to avoid any fragmentation in a difficult moment for the euro area."
The coronavirus, which began in China at the end of 2019, has spread worldwide. There are more than 127,000 confirmed cases globally, according to data from Johns Hopkins University. Italy, one of the biggest economies in the euro area, has the highest number of cases outside China and has implemented a nationwide lockdown.