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Draghi strikes more hawkish bond stance

Thursday, October 04 15:46:39

The European Central Bank will not buy the bonds of already bailed-out countries such as Portugal under its new crisis plan because they do not have full access to bond markets, ECB President Mario Draghi said today.

The statement is being interpreted as a broadside against the Portugese and Greeks and a warning to the Irish and Spanish that - as capital markets expert with Investec in Dublin, Justin Doyle put it states in a bailout programme either "play ball or get off the pitch".

The ECB announced its plan last month to buy the sovereign bonds of stricken euro stated if they applied for aid from their European partners and agreed to strict conditions for economic reforms. Spain has been widely seen the primary candidate for such aid, but has so far resisted applying. That has led to questions about the ECB deploying the bond programe for countries already in rescue programmes such as Portugal.

"OMT would not apply to countries that are under a full adjustment programme until...full market access, complete market access will be obtained," Draghi said after the ECB left interest rates at 0.75 percent.

"This is because the OMT is not a replacement for lack of primary market access."

Portugal day returned to bond markets on Wednesday for the first time since it sought its 78 billion euro ($101 billion) bailout last year, swapping short for longer-dated debt to buy time to fix its finances.

Draghi also said the ECB had no specific targets that it wanted to bring bond yields down to.

Additional reporting from (C ) Reuters