The master plan European Central Bank President Mario Draghi presented yesterday may be “meaningless” if it is restricted to buying government debt with maturities of less than a year, said Christoph Rieger, head of interest-rate strategy at Commerzbank AG.
Mario Draghi said the European Central Bank is “ready to act” as rising money-market rates threaten his drive to reassure investors that borrowing costs will stay low. Bond yields extended their gains.
Italy’s five-year notes dropped, pushing yields to the highest level in more than a week, as borrowing costs increased at a sale of 5.9 billion euros ($7.8 billion) of government debt maturing in 2017 and 2022.
President Mario Draghi said the European Central Bank expects to keep interest rates low for an “extended period” as he tries to restrain market borrowing costs, in a new departure for an institution averse to setting policy in advance.
The rate banks pay for three-month loans in dollars rose to the highest in almost nine months as Europe’s near-$1 trillion support plan in the wake of Greece’s budget crisis failed to encourage banks to step up lending.
The London interbank offered rate, the benchmark for $360 trillion of securities, may not survive allegations of being corrupted unless it’s based on transactions among banks rather than guesswork about the cost of money.