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Tuesday, December 06, 2011

Financial Times: EU negotiators prepare "Bazooka"

by Calculated Risk on 12/06/2011 03:04:00 PM

From the Financial Times: EU talks on doubling financial firewall. The story suggests negotiators are considering allowing the EFSF to continue even after the €500bn European Stability Mechanism (ESM) takes effect next July.

Under the plans being considered, the ESM is unlikely to have its headline €500bn from the start, now envisioned for July. But leveraging up the existing EFSF, which could raise its disposable resources to about €600bn, and adding new IMF and ESM resources could create the so-called “bazooka” effect leaders have been searching for.
excerpt with permission
Also there are discussions about the ECB lending money via the IMF (see FT Alphaville).

Will this bring private investors back into the European sovereign bond markets? And this doesn't address Germany's large current account surplus (and the current account deficits of other countries).

Meanwhile bond yields are much lower than 2 weeks ago ... the Italian 2 year yield is down to 5.59%, and the 10 year yield is down to 5.87%. Both were above 7% not long ago.

The Spanish 2 year yield is down to 4.01%, and the 10 year yield was down to 5.21%. The ten year was at 6.7% on November 24th.

The Belgian 10 year yield is at 4.3% (down from 5.86% on Nov 24th), and the French 10 year yield is at 3.24% (down from 3.72% on Nov 23rd).