The mere announcement of an intervention by the ECB has already had a clear effect on the evolution of the yields on Spanish and Italian bonds in the shortest time. The Spanish two years bond that skyrocketed in July to 7.1%, has fallen to 3.072%. A very different story is however the 10 years bond, currently at 6.57%, far from the peak of 7.7% in July but still very high.
ECB’s decision, therefore, will condition the future debt issues by forcing states to issue shorter-term, explain Banesto analysts. This Thursday the Spanish Treasury expects to raise up to 3,500 million on 2, 3 and 4 years in its first bond auction since July. Therefore, although the ECB’s help will facilitate a reduction in financing costs, key to the sustainability of public finances, it will also help to cut the outstanding debt’s average life. This will give the government less action margin will postpone problems without solving them.
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