ECB Backstop Soothes Selling Pressure On Italian Debt (Mar 2013)


Source: Reuters – ECB backstop soothes selling pressure on Italian debt

Notable excerpts:

The lack of progress in talks to form a government in Italy weighed on the country’s bonds on Monday, but the so-far-untested European Central Bank bond buying backstop prevented a deeper sell-off.

Elections last week produced a hung parliament, raising the risk of a prolonged deadlock, repeat polls and the paralysis of efforts to keep Italy’s 2 trillion euro public debt under control.

The ECB’s promise to buy bonds issued by struggling states offered investors an incentive to hold risky assets, although some in the market have questioned how the scheme could be activated if Italy did not have the reform-committed government required by a potential central bank support programme.