TODAY ITALY AND Spain’s borrowing rates jumped to the highest levels since the beginning of the financial crisis.
Since early August, both countries have received support from the European Central Bank, which has been buying bonds ciculating in the secondary market, according to the Telegraph.
However, the backing of the ECB appears not to have assuaged the worries of investors, who fear that the debt crisis will not be contained.
Yesterday Standard & Poor’s downgraded Italy’s credit rating to A, which – in turn – drove up both Italian and Spanish bond yields.
Italy’s rate on six-month bonds spiked to 3.071 per cent today, compared to 2.14 per cent at the last auction of similar- maturity debt in August, RTÉ reports. Spain’s interest costs also increased.
Sources told Bloomberg that the ECB is likely to begin discussions this October about potentially restarting bond-covered purchases – and may also talk about interest-rate cuts.