Rising bond yields for so-called euro area peripheral nations are working as a “discipline tool” by encouraging nations including Spain and Portugal to impose measures to cut their deficits, BNP Paribas SA said.
“The budget announcements in Spain and Portugal are evidence that market pressure is still bearing fruit, acting as a discipline tool,” London-based economists Luigi Speranza and Eoin O’Callaghan wrote today in a research note. “This is certainly a positive element looking forward. At the same time, there are still a number of risks. Episodes of further market tensions remain likely over the next weeks and months.”