Bonds: Yields climb after Draghi remarks

Date: Thursday 08 Dec 2011

Bond markets have been reacting to comments from Mario Draghi, the head of the European Central Bank, who reiterated today that the ECB was not going to intervene in the sovereign debt market.

Speaking to reporters Mr Draghi said: “We have a treaty that says no monetary financing to governments." The meaning was clear, Mr. Draghi believes governments must sort out the mess they got themselves into. It was for this reason that he repeated his call for the Eurozone to create a “fiscal compact”, a binding agreement which will prevent countries from ever borrowing too much money again.

Without the “financial bazooka” of an ECB bond buying programme bonds markets were left to speculate on a meeting of EU leaders meeting in Brussels tonight and tomorrow. The question is, can they forge a comprehensive agreement that will ease the instability that currently surrounds the euro-area.

The impact of today was to increase the perception of risk amongst the distressed nations:

At 17:48 in Milan, the yield on Italian 10 year debt had risen 46.8 basis points to 6.459%; France, which faces the threat of a two notch downgrade on its AAA debt rating, saw its 10 year notes yielding 3.355% by the close, up 14bp; while the yield on Spanish 10 year bonds climbed 38.3bp to 5.814%.

Lower risk, or “safe haven” bonds generally saw their yields fall:

German 10 year bunds were yielding 2.02% at the close, a drop of 4.4bp; in London, UK 10 year gilts were paying 2.12%, a fall of 11.5bp; while US treasuries were down 4.2bp by the close in Europe at 1.99%.

BS

« Go back to news channel

Email this article to a friend

or share it with one of these popular networks:

• DIGG
• FACEBOOK
• STUMBLEUPON
• MIXX
• YAHOO BUZZ
• DELICIOUS
• REDDIT
• NEWSVINE