Spanish yields fell close to eight-year lows on Friday as investors bet a German court decision to refer a complaint against the ECB’s bond-buying plan to Europe’s top court had reduced the risk it could be curbed.
Report shows that the European Central Bank scheme has not been used since it was unveiled in 2012 but has been credited with stemming attacks on Spanish and Italian bonds at the height of a debt crisis that threatened the survival of the euro.
The ECB reiterated on Friday that its Outright Monetary Transactions plan was within its mandate.
Any potential curb on the OMT would alarm investors. An initial rally in German Bonds, the euro zone safe-haven in times of market volatility, and underperformance of shorter-dated lower-rated euro zone bonds reflected some disquiet.
Germany’s Constitutional Court said in a statement there was good reason to think the scheme exceeded the ECB’s mandate and violated a ban on it funding governments.
However, it said it “also considers it possible that if the OMT decision was interpreted restrictively” it could conform with the law.
Spanish 10-year yields were down six basis points at 3.59 per cent, within sight of their lowest levels since early March 2006. Italian equivalents fell four basis points to 3.72 per cent.