The LTRO continues to support European sovereign debt market despite jitters over Greece. The immediate concern of bank collapses in France and Italy have been taken off the table by the program which has filtered through to the government bond market as well. Lots of that LTRO cash is thought to be ending up in the bond markets, providing the banks with some so-called risk free earnings.
Italian yields have firmed 10 bp today after a 16 bp jump yesterday. Spanish yields are up a more modest 4 bp. German bunds are 4 bp lower, at 1.82% on safe-haven demand.
