ECB’s Rescue Worsens Spain, Italy Maturity Crunch: Euro Credit

Draghi move causes short-term yields to fall

Mario Draghi Mario Draghi

Aug. 8 (Bloomberg) -- European Central Bank President Mario Draghi’s bid to bring down Spanish and Italian yields may spur the nations to sell more short-dated notes, swelling the debt pile that needs refinancing in the coming years.

Yields on Italian and Spanish two-year notes plunged after Draghi said on Aug. 2 the ECB may buy debt on the “short-end of the yield curve” as part of a broader crisis-fighting plan. The gap between Spain’s two-year and 10-year yields rose on Aug. 6 to the widest in at least two decades, while the spread between similar Italian securities also approached a record.

“Spain doesn’t have to come to the bond market until October,” said Steven Major, head of fixed-income research at HSBC Holdings Plc in London. “There’s time for the government to put in place new measures.”

The ECB’s previous efforts to stabilize markets have fallen short. It bought more than 200 billion euros of debt from Greece, Ireland, Portugal, Italy and Spain, and while the initiative helped slow the ascent of yields, all bar Italy have had to seek some kind of external help.

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