Spanish Banks Boost Borrowing from ECB

Spanish banks’ borrowings from the European Central Bank jumped by almost 50 percent in March, reaching the most on record, as lenders tap emergency loans and channel some of it into sovereign debt purchases.

Average net borrowings by Spanish banks climbed to 227.6 billion euros ($300 billion) last month from 152.4 billion euros in February, the Bank of Spain said on its website today. Spanish lenders took 29 percent of the total long-term loans offered to euro-region banks, the data showed. That includes the three-year long-term refinancing operation loans known as LTRO.

Spanish banks are using some of the emergency loans to support the nation’s debt market as Treasury data shows banks have piled up holdings of Spanish bonds. While that helped tame the country’s borrowing costs, it also meshes more closely together the risks to lenders and the sovereign, Economy Minister Luis de Guindos said this week.

“The whole point of the LTRO was to incentivize the banks in ailing countries to take as much liquidity as they could, and the Spanish banks have done just that,” Gilles Moec, co-chief European economist at Deutsche Bank, said by phone.
Yields Rise

Spanish bonds fell, pushing the 10-year yield to 5.93 percent at 11 a.m. in Madrid from 5.82 percent yesterday, and widening the gap between Spanish and German borrowing costs to 416 basis points.

Bloomberg

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Dean Popplewell

Dean Popplewell

Vice-President of Currency Analysis and Research at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell