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ECB

Spanish bond yields hit record low

The yield on Spanish, Italian and German 10-year government bonds fell to new record lows on Tuesday, the day after the ECB began a massive bond-buying programme to ward off deflation in the eurozone.

Spanish bond yields hit record low
The European Central Bank, in Frankfurt, launced a new quantitative easing programme on Monday. Photo: Daniel Roland/AFP.

The rate of return to investors on 10-year Spanish government bonds fell to 1.231 percent from 1.275 percent on Monday. 

The yield on 10-year Italian government bonds fell to 1.220 percent from 1.280 percent and those of Germany fell to 0.279 percent from 0.312. 

The European Central Bank launched on Monday a so-called quantitative easing (QE) programme that will see it buy €60 billion of eurozone government and corporate bonds through next September.

The ECB hopes that by buying bonds off investors they will invest the money elsewhere, thus boosting growth and preventing a dangerous cycle of falling prices from setting in.

Eurozone bond yields have been falling in recent weeks to record lows as investors anticipated the increased demand from ECB purchases.

The yield on French 10-year bonds was at 0.568 percent in morning trading, above the record low of 0.521 percent set in January.

Greek bonds are not benefitting from the decline in yields due to a new spike in concerns over its finances as well as Greek debt not being included in the QE programme.

ECONOMY

Spain’s De Guindos in line for ECB job after Irish candidate withdraws

Irish central bank chief Philip Lane pulled out of the race for the vice-presidency of the European Central Bank on Monday, leaving favourite Spanish Economy Minister Luis De Guindos the only candidate.

Spain's De Guindos in line for ECB job after Irish candidate withdraws
Photo: AFP

Eurozone finance ministers were widely expected to pick their Spanish peer for the top job, the first of a series of changes at the ECB over the coming two years, including the post of the chief of the bank currently held by Italian Mario Draghi.

“I will be withdrawing Philip's name and I have spoken to Minister De Guindos and wished him the best of luck this evening,” Irish Finance Minister Paschal Donohoe said as he arrived for talks to fill the post with his
eurozone counterparts.   

The ministers “will make a decision tonight that will be in the best interest of the functioning and success of the European Central Bank,” he added.

The choice comes despite the scepticism of senior European lawmakers who said they preferred Lane, who is not a politician, over his rival after an informal hearing last week.

MEPs raise concerns over de Guindos as ECB candidate

EU leaders will ultimately choose the successor to Portugal's Vitor Constancio, whose eight-year mandate expires in May, as the ECB's number two.   

That decision will be taken on March 22 at an EU summit after consultations with the European Parliament and the ECB's Governing Council.   

De Guindos, a veteran of eurozone economic policy, said this month he was “convinced” he will have enough support to clinch the post after Madrid officially nominated him for the job.

De Guindos defended his candidacy, saying he was the longest-serving member of the Eurogroup, which groups eurozone finance ministers.   

He has served as economy minister since Prime Minister Mariano Rajoy's conservative government came to power in 2011.   

As economy minister he oversaw the clean-up of Spain's banking industry that collapsed after a housing boom imploded during the worst of the eurozone debt crisis.

In exchange Spain had to impose tough austerity measures to reduce the county's public deficit.

Before entering the government, De Guindos led the Iberian unit of Lehman Brothers between 2006 and 2008 before the investment bank collapsed.