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Bond yields tumble in Europe as crisis fears ease

December 1, 2011 | 11:33 am

Europe continued to pull back from the brink Thursday as government bond yields fell for a fourth day in France, Italy, Spain and other countries.

The drop in yields followed a move by six major world central banks on Wednesday to pump more money into the global financial system, a strategy aimed particularly at assisting cash-strapped European banks.

Bond buyers also got gutsier as European Central Bank President Mario Draghi hinted that the ECB could take more aggressive action to help ease the continent’s debt crisis -- if countries pledge to keep spending in check.

The ECB has been under enormous pressure to boost its purchases of Eurozone bonds as a way to push yields down, after many investors abandoned the debt market in recent months amid fears of a wave of sovereign defaults.

But investors showed a renewed appetite for European debt Thursday as France and Spain successfully sold new bonds.

In debt trading, the market yield on two-year French bonds slid to 1.13%, down from 1.29% on Wednesday and a recent high of 1.90% a week ago.

Spanish two-year bond yields tumbled to 4.78% from 5.37% on Wednesday and 6.09% a week ago.

The euro currency continued to edge up, rising 0.2% to $1.347. The euro hit an eight-week low of $1.324 last week.

European stock markets ended modestly lower after Wednesday’s big gains. The German market fell 0.9% after surging 5% on Wednesday. The French market eased 0.8%, Italian stocks slipped 0.2% and the Spanish market was off 0.3%.

Wall Street was largely flat at about 11:30 a.m. PST. The Dow Jones industrial average was off 13 points to 12,031 after rocketing 490 points, or 4.2% in Wednesday’s global rally.


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Photo: European Central Bank President Mario Draghi. Credit: Jock Fistick / Bloomberg News