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ECBís Rescue Worsens Spain, Italy Maturity Crunch: Euro Credit

Bloomberg - Aug 8, 2012

European Central Bank President Mario Draghiís bid to bring down Spanish and Italian yields may spur the nations to sell more short-dated notes, swelling the debt pile that needs refinancing in the coming years.

In a renewed effort to solve the crisis, the ECB lent banks about 1 trillion euros for three years in December and February, with Spanish banks among the main beneficiaries. Yields on Italian and Spanish two-year notes plunged after Draghi said on Aug. 2 the ECB may buy debt on the ďshort-end of the yield curveĒ as part of a broader crisis-fighting plan. The gap between Spainís two-year and 10-year yields rose on Aug. 6 to the widest in at least two decades, while the spread between similar Italian securities also approached a record.

The average maturity of Spanish debt is the shortest since 2004 as Spain, like Italy, hasnít issued 15- or 30-year bonds all year. As Prime Ministers Mario Monti and Mariano Rajoy fight to avoid bailouts that may threaten the euroís survival, the ECBís plan risks adding to pressure on the two nationsí treasuries.

Read Full Article from Bloomberg

- Posted: 2012-08-08 16:09:28


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