Practical Economy
Practical Economics
Read “ Chalice and the blade “
HW:
TOP HDI: 1. Norway 2. Australia 3. Netherlands 4. US
Bottom HDI: 1. Mozambique 2. Burundi 3. Niger 4. Congo
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The euro-zone crisis
Time to celebrate?
Government-bond markets in peripheral countries are soaring
Jan 19th 2013 |From the print edition
THE squiggles on traders’ screens showing changes in the prices of government bonds are the closest thing that financial markets have to ECG machines for economies. By this diagnostic measure the invalids in Europe’s medical ward are making a remarkable recovery.
On January 10th the interest rate on Spanish ten-year government bonds fell below 5% for the first time in almost a year. Even though rates then ticked up a tad, the cost of new government borrowing is now about 2.5 percentage points lower than it was when worries over a break-up of the euro area peaked in July 2012 (see left-hand chart). The Italian patient is doing well too. The rate on ten-year Italian debt is approaching 4%, which is also close to 2.5 percentage points off the highs last year.
Other measures show improvement as well. Big banks in Italy and Spain are managing to sell long-term bonds. European banks also seem likely to reduce their dependence on the lifeline extended by the European Central Bank (ECB) through its long-term refinancing operations. Huw van Steenis, an analyst at Morgan Stanley, reckons that banks (mainly those in the core of Europe) may repay €100 billion-200 billion ($133 billion-266 billion) of the €1 trillion in cash they borrowed from the central bank in 2011 and 2012. Mario Draghi, the president of the ECB, says that a “positive contagion” is sweeping through Europe. The idea has some merit, but is the region really on the mend?
The first cause for investor optimism stems from the assurances by Mr Draghi that the ECB will do whatever it takes to save the euro. That sparked a burst of
Read “ Chalice and the blade “
HW:
TOP HDI: 1. Norway 2. Australia 3. Netherlands 4. US
Bottom HDI: 1. Mozambique 2. Burundi 3. Niger 4. Congo
Article =
The euro-zone crisis
Time to celebrate?
Government-bond markets in peripheral countries are soaring
Jan 19th 2013 |From the print edition
THE squiggles on traders’ screens showing changes in the prices of government bonds are the closest thing that financial markets have to ECG machines for economies. By this diagnostic measure the invalids in Europe’s medical ward are making a remarkable recovery.
On January 10th the interest rate on Spanish ten-year government bonds fell below 5% for the first time in almost a year. Even though rates then ticked up a tad, the cost of new government borrowing is now about 2.5 percentage points lower than it was when worries over a break-up of the euro area peaked in July 2012 (see left-hand chart). The Italian patient is doing well too. The rate on ten-year Italian debt is approaching 4%, which is also close to 2.5 percentage points off the highs last year.
Other measures show improvement as well. Big banks in Italy and Spain are managing to sell long-term bonds. European banks also seem likely to reduce their dependence on the lifeline extended by the European Central Bank (ECB) through its long-term refinancing operations. Huw van Steenis, an analyst at Morgan Stanley, reckons that banks (mainly those in the core of Europe) may repay €100 billion-200 billion ($133 billion-266 billion) of the €1 trillion in cash they borrowed from the central bank in 2011 and 2012. Mario Draghi, the president of the ECB, says that a “positive contagion” is sweeping through Europe. The idea has some merit, but is the region really on the mend?
The first cause for investor optimism stems from the assurances by Mr Draghi that the ECB will do whatever it takes to save the euro. That sparked a burst of