Der Spiegel reported ECB may set an interest rate

Der Spiegel reported ECB may set an interest rate : The European Central Bank is considering setting limits on yields of euro area sovereign debt by pledging unlimited bond purchases, Germany’s Spiegel magazine reported without saying where it obtained the information.

The policy will be decided at the September meeting of the ECB’s governing council, Spiegel said. The Frankfurt-based central bank would immediately publish bond purchases after making them, the magazine added. An ECB official declined to comment on the article.

Speculation about additional ECB intervention to counter Europe’s sovereign debt crisis helped lift Spanish government bonds for the first week this month. Spain’s 10-year yield slid 46 basis points, or 0.46 percentage point, to 6.44 percent last week, the lowest since July 5.

ECB President Mario Draghi said on Aug. 2 that the central bank may buy government debt in unison with the region’s bailout funds to address elevated yields that are “related to fears of the reversibility of the euro.” Chancellor Angela Merkel backed the ECB’s insistence on conditions for helping reduce borrowing costs on Aug. 16, saying Germany is “in line” with the central bank’s approach to defending the euro.

Even so, economists are divided on Draghi’s ability to deliver on such debt purchases. Daiwa Capital Markets Europe said last week the central bank may disappoint investors by limiting the size of potential bond purchases and may force Spain and Italy to sign memorandums of understanding in return for help.

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