(menafn – ecpulse)
Despite the efforts done by European officials to ease the debt crisis, it seems that a lot of reforms from the euro area's highly indebted nations are needed to pass to the safe side.
Still, there are worries in markets after the rise in Spanish 10-year bond yields to 6 percent yesterday, coming close to levels which forced Greece, Portugal and Ireland to ask for international bailouts.
Later in the day, investors will focus on Italian bond selling of three-year notes after yesterday's auction showed a sharp rise in borrowing cost.
Italy sold 11 billion euros of bills on Wednesday, where the government borrowed 8 billion euros from the 361-day bonds with a surge in borrowing cost to 2.84% compared to 1.405% in the last auction on March 13. Also, 3 billion euros were gathered from the selling of three-month securities with a soar in yield to 1.249% from 0.492% last month.
There worries that debt contagion may spread to the region's debt-trapped nations causing an exacerbation in the debt dilemma, especially as bailing out of economies with the size of Italy and Spain is not guaranteed despite the increase in the European rescue fund by 500 billion euros in addition to the current 300 billion euros to create a total of 800 billion euros to combat crisis.
However, European Central Bank Executive Board member Benoit Coeure clarified yesterday that the European Central Bank might revive the bond-purchase program to prevent rising borrowing costs from pressuring Spain to ask for an international bailout.
In fact, his remarks eased tensions and supported markets to rebound on speculation the European Central Bank will intervene and control rising yielding on Spanish bonds.
Also, Spanish Prime Minister Mariano Rajoy said Spain will not need a bailout.
Regarding the macroeconomic situation, ECB President Mario Draghi said on Wednesday it is too early to talk about withdrawing liquidity from markets as European economies still needs help amid the surging joblessness and contractions recorded by euro area economies.
He stressed on the positive effect of the LTROs on bank's lending stating that "any exit strategy talk is premature," where he expects euro area economies to recover gradually with the likelihood of seeing a contraction in the first quarter.
However, data released today showed that euro zone industrial production expanded 0.5% in February from the previous of 0.2%.
In the U.K., visible trade deficit unexpectedly widened to 8772 million pound from the revised previous of 7883 million from 7532 million, worse than expectations of 7650 million pound.
Meanwhile, the euro is showing slight advance versus the U.S. dollar after lowering its gains when it touched a high of 1.3150 to trade around 1.3115. The pound versus the dollar is also showing a surge on the daily basis where the pair is traded around 1.5930 after opening today's trades at 1.5904.