The Italian dog that did not bark is one of the great untold market stories of the past month. The yield on Rome’s 10-year bonds is around 4.3 per cent, a level not seen since the end of January.
Chart: Italy’s 10-year bond yield (black line) over the past five years; blue line shows the yield on the German 10-year bund
(Chart courtesy Reuters)
The spread with the Bund, which has obsessed Italians since the market panic at the end of 2011, has narrowed to just above 300 basis points. It almost looks as if February’s inconclusive election and the accompanying political uncertainty do not matter. This is puzzling, so here are a few tentative explanations:
1) Mario Draghi’s magic. The pledge by the president of the European Central Bank last summer to do “whatever it takes” to save the euro is the single most important explanation for the relative quiet on Italy’s bond market. The Outright Monetary Transactions scheme, whereby the ECB will purchase unlimited quantities of debt of countries in difficulty, has so far proven a remarkably resilient firewall. Read more
Here are the pieces that got us chatting this morning:
Here’s what we’ve been chatting about today:
Still super, Mario?
By Tom Burgis and Esther Bintliff on the news desk in London with contributions from our correspondents around the world. All times GMT.
Another big day for “Super” Mario Draghi, the European Central Bank president. 800 banks borrowed a total of €529bn under the ECB’s liquidity programme — more than last time. We were watching too for ripples from Dublin’s decision to hold a referendum on the eurozone fiscal pact.
19.20: We’re going to wrap up the live blog for today, so here’s a final round-up of today’s events:
- In round two of the European Central Bank’s Long-Term Refinancing Operation (or LTRO), 800 European banks borrowed €529.5bn
- A larger number of banks borrowed money than last time (when 523 banks borrowed €489bn)
- About €310bn of net new liquidity was added to the system
- More than two thirds of the volume was taken up by banks in three countries, thought to be Spain, Italy and France. Among the biggest takers of funds was Italy’s Intesa SanPaolo, with €24bn, double the amount it took in the December operation. UK bank Lloyds is believed to have been the biggest non-eurozone taker of funds, receiving €11.4bn.
- In the markets, risk assets were initially firm on the back of the LTRO figures, but later fell back as Fed chairman Ben Bernanke spoke to Congress and dampened speculation that further monetary easing was on its way
- On the plus side, US growth data for the fourth quarter was revised upwards, from 2.8 per cent to 3 per cent
- The FT’s Brussels bureau chief Peter Spiegel got a copy of the draft conclusions from the EU council summit that begins tomorrow
- EU Commission president Barroso met with Greek prime minister Lucas Papademos – see our 17.58 update
Dado Ruvic, Reuters
Welcome to our continuing coverage of the eurozone crisis.
All times GMT. By Tom Burgis and Esther Bintliff in London, and Anjli Raval in New York, with contributions from FT correspondents around the world.
23.13 European finance chiefs deferred ratifying a rescue package for Greece, pressing the government in Athens to put a newly struck austerity plan into action. Here are some closing remarks after talks this evening where no final decision on the deal was made:
- Greece is in “the middle of the road,” and much work remains on its recovery, the country’s prime minister Lucas Papademos said in a statement.
- Greece must pass its latest austerity package into law and identify €325m in spending cuts before euro-area governments endorse a second bailout for the country, Luxembourg prime minister Jean-Claude Juncker said after chairing the emergency meeting of euro-area finance ministers. “Despite the important progress achieved over the last days we didn’t yet have all necessary elements on the table to take decisions today,” he said.
Christine Lagarde, IMF managing director said: ”There is clearly some very encouraging news coming out of Athens and … after the very heavy duty work that has been done lately, I think it’s positive.”