Market information

Monday, November 28, 2011

The International Monetary Fund (IMF) has indicated that they are not in negotiations with Italy. With this statement, the IMF spokesman rejected various media reports that reported last week that the IMF was planning an aid package with a volume of EUR 600 billion. According to the media, Italy could borrow with this aid-package at a rate of 4-5%. The rumors led to higher stock markets in Asia but are now denied by the IMF.

The German newspaper Die Welt reports today, based on information from EU senior diplomats, that Germany is considering issuing elite-bonds (AAA-Bonds). Germany would issue these new bonds together with the Netherlands, France, Finland, Luxembourg and Austria. Chancellor Merkel, would only consider the issuance of these elite bonds if the 27 EU Member States fail to agree on new EU treaties on controls on public finances and fiscal rules.

The European Union was content with the Belgian agreement on the reduction of the state budget. The new Belgian government wants to decrease the budget deficit by 2.8% next year in order to comply with the deficit limit of 3% as stated by the EU.

Jurgen Stark, the leaving chief economist of the ECB, is deeply concerned about the independence of the ECB. According to Stark, the political pressure on the ECB is very large and the political debate is focused on extending the tasks of the ECB. "This not only affects the independence of the ECB, it also endangers this." said Stark. According to Stark, it is not the role of the central bank to correct the markets as they require higher interest for loans to countries that are in debt. According to several sources Stark resigned from the ECB because of dissatisfaction with the buy-back policy. In his farewell interview he said that neither the purchase of bonds, nor the reprinting of money will solve the debt crisis.

6M Euribor increased by 1 basis points to 1,71%. The 10Y Swap increased by 7 basis points to 2,72%.

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