This action came after markets had also been happy to put a positive spin on news that the European Commission would forge ahead with its proposals for a eurozone bond, a product considered politically unfeasible by many but which, if created, could help ease the funding difficulties of the more fiscally hobbled nations.
Furthermore, confidence in the eurozone’s ability to hold together was backed by Tim Geithner, US Treasury secretary. He gave a vote of approval to the European financial stability facility, and he has suggested at the two-day meeting of European finance ministers in Poland that the fund uses leverage to provide a bigger cushion in the event that troubled European sovereigns need further bail-out funds.
Spreads of eurozone government bonds have tightened as funding concerns have eased somewhat. The yield on Italian 10-year paper is down 19 basis points at 5.41 per cent – as the European Central Bank was believed to be in the market – though it should be noted that yields remain at unsustainably elevated levels.
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