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There are a ton of negative headlines coming out of Europe this morning.Besides rumours about an impending downgrade of France’s credit rating and worries about rising Italian bond yields, today brings new fears about the eurozone crisis.
Here’s a round-up of what’s going on right now:
- The European Central Bank failed to fully sterilize its secondary market purchases of sovereign bonds this morning. When a central bank sterilizes its bond purchases, it auctions off deposits equal to the total volume of bond purchases it started buying bonds in May 2010. By offering these deposits it takes liquidity out of the system. The bank wanted to take in €203.5 billion in deposits but only received offers to draw in €194.2 billion from just 85 bidders, according to ZeroHedge.
- On the other hand, the ECB’s most recent failure could propel it to take stronger action. But that hope is probably not worth banking on.
- Investors are chattering about rumours that the European Financial Stability Fund—the fund responsible for bailing out Europe—will not be able to leverage itself even to the €1 trillion ($1.39 trillion) EU leaders had previously suggested. What’s more, traders are tweeting about a rumour that the European Financial Stability Facility will only be leveraged by 2.5 times, to €625 billion ($839 billion).
- German government yields are up again today, with the 10-year hitting 2.36% in midday trading. The rising yield on bunds is one of the most significant signs that the central eurozone could be in jeopardy.
Finance ministers from all 17 euro area countries—the Eurogroup—are meeting today to discuss how to assuage fears about PIIGS debt and upcoming disbursements of bailout aid to Italy and Ireland.
UPDATE: Initial headlines coming out of that meeting aren’t too optimistic. The Belgian Finance Minister told Reuters that if EU leaders were unable to come up with a solution to the crisis, they should try to defend the currency. The very suggestion that EU leaders might not step up to the plate is worrying.
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