Bloomberg: European Central Bank President Mario Draghi signaled that officials are prepared to do whatever is needed to preserve the euro and act on surging bond yields that are tearing at the seams of the 17-nation currency bloc.
“To the extent that the size of these sovereign premia hamper the functioning of the monetary policy transmission channel, they come within our mandate,” Draghi said during a speech inLondon today. “We have to cope with the financial fragmentation, address these issues.”
“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” Draghi said. “And believe me, it will be enough.”
The comments come as Spanish policy makers call on the ECB to do more to fight a renewed bout of financial turmoil that pushed the yields on the country’s bonds to euro-era records this week. Spanish bonds rose after Draghi’s remarks. The yield on the 10-year bond, which touched a record 7.69 percent on July 22, fell 14 basis points. It was at 7.24 percent at 12:27 p.m. in Madrid.
``His comments certainly suggest that ECB purchases of Spanish and Italian bonds are back on the table for discussion, as is another LTRO,'' said Chris Scicluna, an economist at Daiwa Capital Markets Europe in London. ``But -- just like last summer -- we would expect any new ECB bond purchases to be temporary and limited until other policies are put in place.''
The euro also jumped and stocks rose. The single currency climbed as high as $1.2208 after trading at $1.2118 before he spoke. The Dow Jones Stoxx 600 Index climbed almost 1 percent, rising as high as 252.83 points.
reporter on this story: Jeff Black in Frankfurt