Might “Whatever it takes” turn sometime now into “What if?”

by Antonis D. Papagiannidis

Greek 10-year bonds greeted the month of September with yields higher than 4.2%; crossing the fateful threshold of 4% came just four days earlier, while August had started at less than 3%. May, June and July played out at 3,4%-3.9%. The yields for longer-duration bonds, especially so the 15-years ones where the Public Debt Management Agency is said to try and access now the financial markets so that Greece is not singled out as hesitating to keep its financing at market terms (be they quite expensive), are a notch lower at 3.95%-4.10%. This looks something of a curiosum but may be explained by the shallow and skeved market for Greek sovereigns.

The yield for Italian benchmark 10-years bonds has been hovering just under the – equally fateful, for an economy widely considered “too big to fail” – threshold of 4%, at 3.9% – plus.

Italian spreads over Bunds are close to 2.4%, Greek spreads are at 2.6%.

All of the above, while the ECB Transmission Protection Instrument (devised to protect weaker States of the Eurozone from escalating borrowing costs) has already made its presence felt at financial markets; the latter of course, are far more concerned about the size (and rationale to be used in its explanations) of the September 8 ECB Governing Council meeting over euro rates. If the ECB toes the line of the hawks professing the need for a 0.75% rate increase instead of a “steady as it goes” 0.5%, all will have to deal with rough seas.

So will the ECB’s own TPI, which is supposed to be the “Whatever it takes” of today do its miracle? All ardently hope it will not bring back the dreaded question “What if?…”