European Central Bank Said to Be Buying Spanish, Italian Bonds

The European Central Bank bought Spanish government bonds, according to three people with knowledge of the transactions, extending this month’s purchases to restrain the nation’s borrowing costs.

The central bank also bought Italian debt, according to two of the people, who asked not to be identified because the deals are confidential. A spokesman for the central bank declined to comment. The ECB was also said to buy the nations’ debt yesterday.

The yield on Spanish two-year bonds slid four basis points to 3.28 percent as of 12:01 p.m. in London after rising to 3.35 percent earlier. The extra yield, or spread, investors demand for holding 10-year Spanish securities instead of German bunds fell to 274 basis points from 280 basis points yesterday. Italian two-year notes pared losses, yielding 3.35 percent compared with 3.38 percent earlier.

The ECB started buying Spanish and Italian bonds on Aug. 8 to halt contagion from the crisis in Greece, Portugal and Ireland from spreading to the two larger countries, whose combined government securities outstanding are double Germany’s indebtedness. The purchases are part of its Security Market Program, which was set up last year to stabilise markets roiled by the debt crisis.

To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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