Domenica, 21 Ottobre 2018

Spread drops as Draghi outlines bond-buying plan


(ANSA) - Frankfurt, September 6 - The spread between
Italian and German bonds narrowed Thursday as markets cheered a
bond-buying plan designed by the European Central Bank to lower
borrowing costs for troubled states.
The program provides a "backstop" that will allow the
central bank to deal with market distortions driven by fear, ECB
President Mario Draghi said at a news conference.
His words had a quick and dramatic effect on markets.
As he spoke, the spread between Italy's 10-year bond and
the German Bund - a reflection of investor confidence - fell to
378 basis points with a yield of 5.33%.
At some of Italy's worst moments in the current
sovereign-debt crisis, the spread had topped 500 basis points.
Draghi said ECB policy-makers agreed on an unlimited
bond-purchase program in order to better manage interest rates
in the euro area and provide some protection for the common
currency by countering financial-market speculation about the
euro's future.
The program "will enable us to address severe distortions
in government bond markets, which originate from....unfounded
fears on the part of investors of the reversibility of the
euro," Draghi told reporters.
"Under appropriate conditions, we will have a fully
effective backstop to avoid destructive scenarios."
The "appropriate conditions" clause tells governments in
troubled countries, including Italy and Spain, that they must
request assistance under the program and live with whatever
stringent conditions may be imposed.
That means ECB bond purchases would be conditional on
governments signing up to a European Financial Stability
Facility or European Stability Mechanism programme.
"Governments must stand ready to activate the EFSF/ESM in
the bond market when exceptional financial-market circumstances
and risks to financial stability exist - with strict and
effective conditionality," Draghi said.
Under the program, Draghi said the central bank could
potentially buy an unlimited amount of eurozone sovereign debt
with maturities of between one and three years.
The ECB has been sharply divided on the bond-purchase
In the face of Draghi's determination to protect the euro,
Germany's Bundesbank has harshly criticized his bond-purchase
Draghi alluded to that in his news conference, telling
reporters approval of the new program was not unanimous.
"There was one dissenting view," said Draghi, who also held
the ECB's key lending rate unchanged at 0.75%.

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