LONDON: Yields spreads between bonds issued by euro zone's lower-rated states and benchmark German Bunds narrowed on Monday, in reaction to an unexpected agreement by EU leaders to boost the powers of the bloc's bailout fund.
Euro zone leaders agreed to increase the full lending capacity of the European Financial Stability Facility and allow it to buy bonds of distressed countries in primary markets and lower the interest rate on Greece's bailout.
Irish spreads were little changed, however, as better bailout terms were only announced for Greece.
"It's just a knee-jerk reaction to the EU summit getting an agreement out earlier than expected, I think it's caught the market a little off guard. Not Ireland because they didn't get anything out of it, “one trader said.
Spanish, Portuguese, Italian and Greek spreads were last around 10 basis points narrower on the day.
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