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Reuters is reporting today that the European Central Bank is making progress toward a bond market intervention program that would help stabilise government funding costs in troubled euro nations like Spain by forcing bond yields into a determined trading band.Via Reuters:
The European Central Bank is considering setting yield band targets under a new bond-buying programme to allow it to keep its strategy shielded and avoid speculators trying to cash in, central bank sources told Reuters on Friday…”That is the most likely approach, and also the one that could be most successful.”
It is not clear how wide that band would be or how the ECB would then decide when to intervene in the bond markets to bring down the borrowing costs.
A further point under discussion is whether such a band would be tied to bond yields – their absolute interest rate levels – or bond spreads, the difference between a country’s debt compared to the benchmark German bonds.