8
7
6
5
4
3
2
1
H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2
2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012
Spanish andGerman 10-year bond yields (2007-2012)
Daily data
With both Spain and Italy on the verge of losing access to
financing markets, the euro at two year lows with respect
to the dollar and the economic weakness spreading
across the euro zone, the need to take measures under
the current institutional framework became urgent. As a
result the ECB decided on 5 July to lower the benchmark
interest rate by 0.25 points to 0.75% and cut the interest
rate for the deposit facility to zero. Several days later, Euro-
pean Union leaders approved the financial assistance
package for Spain amounting to a maximum of EUR100
billion to capitalise the banking system and accelerate its
adjustment process, on the condition that the country
comply with the terms set forth in the Memorandum
of Understanding (MoU). In addition, it set the stage for
making advances towards an effective European banking
union, with centralised supervision and the possibility
of directly capitalising banks in difficulty. The inflection
point occurred at the end of July, and coincided with
the declarations of ECB senior officials regarding a more
active role in preserving the euro, which was confirmed
in September with the announcement of a plan for
unlimited debt purchases, subject to conditions (OMT),
to ease the pressure on the risk premiums in countries
such as Spain and Italy under the aegis of which the ECB
could intervene in the secondary debt market following a
request to the rescue funds for assistance, and subject to
the terms established.
In October, the European Stability Mechanism was
launched. This is a new permanent instrument to provide
assistance to member countries in difficulties and to
ensure the financial stability of the euro zone. It has a
lending capacity of up to EUR700 billion.
In contrast to the tensions seen in certain sovereign debt
markets, corporate debt has enjoyed a positive year, and
interest rates for long term issues from large companies
have declined appreciably.
At the end of November, the index of interest rates for
corporate European corporate bonds with BBB ratings
stood at lower levels than in 2006, before the financial
crisis took hold.
In Spain, tensions surrounding government debt were
reflected in interest rates and also in trading volumes that
were much lower than in 2011. According to data from
the Spanish Public Debt Book-Entry System, which is over-
seen by the Bank of Spain and whose settlement activities
are processed by Iberclear, spot transactions fell 30%, to
€4.7 billion. In regard to electronic trading in public debt,
which is channeled mainly through the BME Public Debt
electronic trading platform, the activity declined in year-
on-year terms, with an accumulated trading volume in
2012 of €40.84 bn.
42
BME Business Areas
4
Annual
Report 2012
/ BME
1...,32,33,34,35,36,37,38,39,40,41 43,44,45,46,47,48,49,50,51,52,...222