PARIS (MNI) – European Central Bank President Mario Draghi’s
comments Thursday about borrowing premia on government debt falling
within the ECB’s mandate have raised the prospect of a resumption of the
central bank’s bond buying program, analysts said.
“His comments certainly suggest that ECB purchases of Spanish and
Italian bonds are back on the table for discussion, as is another LTRO,”
said Chris Scicluna at Daiwa Capital Markets in a research note.
Speaking in London, Draghi said that “to the extent that these
premia have to do not with factors inherent to my counter party, they
come into our mandate, they come within our remit.”
“To the extent that the size of the sovereign premia hamper the
functioning of the monetary policy transmission channels, they come
within our mandate,” he added.
The comments prompted Eurozone peripheral bond yields to
extend their declines from Wednesday’s peaks. The Italian 10-year bond
yield fell 34 basis points to 6.10%, while Spain’s 10-year bond yield
dropped 30 basis points to 7.07%. The euro also rose strongly.
Scicluna of Daiwa said that if the ECB Seciurities Market Program
is revieved it will only be temporary until the European Stability
Mechanism is ready or when a new long-term LTRO can be conducted.
Draghi also said “within our mandate, the ECB is ready to do
whatever it takes to preserve the euro. And believe me, it will be
enough.” This echoed Draghi comment in a Le Monde interview over the
weekend that ECB would have “no taboos” in its policy response to the
debt crisis.
“The ECB appears to be keen to increase the threat of the SMP being
woken from its hibernation period,” analysts at BNP Paribas said in a
research note.
“This is intensifying speculation about the ECB announcing that the
SMP is back in business at the policy meeting next Thursday, if not
before.”
–Paris newsroom; +33142715540; jduffy@marketnews.com
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