The European Central Bank is looking at possibly extending the term of loans it offers banks to 2 or even 3 years to try to prevent the euro zone crisis precipitating a credit crunch that chokes the economy.
The central bank is looking into offering banks liquidity over a 2-year or even 3-year horizon, aiming to free up the increasingly blocked interbank money market and give banks more leeway to buy and hold sovereign bonds. To date, the longest term it has offered funds is one year.
German business sentiment unexpectedly rose in November for the first time since June, according to an IFO survey. The influential think tank’s business climate index, based on a monthly survey of 7,000 companies, edged up to 106.6 from October’s figure of 106.4. The figures provided some relief following Wednesday’s German government bond auction. An IFO economist said the figures suggested Germany will avoid recession this winter.
Portugal has had its debt rating cut by Fitch to so-called “junk” status, and warned it could be cut again. Fitch made the downgrade because of its “large fiscal imbalances, high indebtedness across all sectors and adverse macroeconomic outlook”. Portugal’s debt rating was cut by one notch, to BB+ from BBB-, and put on “negative outlook”, meaning it is likely its debt will be downgraded again.
Italian bills will be auctioned today, to the tune of €8billion, the 2 year yield climbed to 7.32% yesterday – the highest since 1997.
The pound has been stuck within a range of little more than two cents since the beginning of November. Because everyone seems content with the situation it could continue there for another week or maybe longer. Cautious buyers of the euro should hedge their exposure by fixing a price for half the currency they will need. Those with an appetite for risk might consider covering less th
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