Spanish and Italian Bond Yields Drop on E.C.B. Buying
MADRID — Spanish and Italian government bond prices rose and their yields fell Tuesday for a third consecutive session after the European Central Bank stepped <a href="www.bestnikeshoesforstore.com"><strong>Best nike shoes for store</strong></a> in to purchase their sovereign debt, part of efforts to prevent the euro zone debt crisis from deepening in two of the largest economies that share the currency. The E.C.B.’s purchasing of Spanish and Italian bonds, which was reported by traders but which the central bank itself would not confirm, came amid broader market turmoil following a decision Friday by Standard & Poor’s to lower the gilt-edged U.S. debt rating by one level, to AA+ — a move that has was condemned by government officials in Washington. Last week, the cost of borrowing of both Spain and Italy soared to record highs — yields on their 10-year bonds topped 6 percent — underlining concerns among investors that weakened governments in Madrid and Rome would not manage to clean up their public finances as quickly as previously promised. Such worries have also been exacerbated by disappointing economic data, notably lower-than-expected growth in Spain of 0.2 percent in the second quarter. But Elena Salgado, the Spanish finance minister, insisted Tuesday that Spain was on track to meet its fiscal targets this year. <a href="www.bestnikeshoesforstore.com"><strong>cheap nike shoes </strong></a> “Spain’s fundamentals show we are very far from requiring a bailout,” Ms. Salgado told Onda Cero, a Spanish radio station. In late trading Tuesday, the yield on Spain’s benchmark 10-year government bonds was down an additional 0.1 percentage point, at 5.019 percent, after reaching a record high of 6.458 percent on Aug. 2. The yield on 10-year Italian bonds, meanwhile, had fallen to a one-month low of around 5.143 percent. Analysts warned that the market rebound could be short-lived, given its reliance on further E.C.B. intervention. Jane Foley, a senior foreign-exchange strategist at Rabobank International in London, told Bloomberg News that although the E.C.B’s decision to buy Spanish and Italian bonds “may have had clear benefits in treating the symptoms of the crisis, it is not a cure.” She added: “Not only does it raise questions over how much political pressure the E.C.B. may have succumbed to, but the sheer size of the outstanding debt of Spain and Italy must make for some discomfort at the E.C.B.” Ms. Salgado said that markets may settle somewhat <a href="www.bestnikeshoesforstore.com"><strong>women nike heels </strong></a> before governments need to go back in, as August is typically the quietest month of the year in terms of sovereign bond issuance. “What we are seeing is instability on the markets, which will ease through August,” she said. The bond market volatility has hit Spain at a time of political fragility. On July 29, José Luis Rodríguez Zapatero, the Spanish prime minister, called an early general election for Nov. 20, bowing to pressure from opposition politicians and business leaders after his Socialist Party suffered a historic defeat in regional and municipal elections last May. Opposition politicians have since urged Mr Zapatero to again push forward the election date, this time to October, in response to investors’ fears about weak political leadership in a time of market turmoil. Ms. Salgado disputed that idea Tuesday, saying that another change in the election calendar would not be “a good idea.” Instead, she pointed to measures announced this month to help reduce the deficit quicker — including a change in the corporate tax calendar and a cut in pharmaceutical expenditures — as evidence that the government was pushing through with its fiscal plans. Madrid has pledged to lower its budget deficit to 6 percent of gross domestic product this year, from 9.2 percent in 2010. Antonio Garcia Pascual, an analyst in London for Barclays Capital, wrote in a note on Tuesday that the additional measures should enable Spain to <a href="http://www.chinabaike.com/plus/guestbook.php"><strong>Triple Choice Tuesday: A Striped Armchair - Reading Matters</strong></a> meet its 6 percent deficit target. But he warned that federal government belt-tightening risked being offset by fiscal indiscipline among regional governments, unless Madrid stepped in. “The risks of fiscal slippages in the regions are likely to persist,” he said, “and may remain a concern for the markets so long as more bold steps are not taken.”
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