FT: ECB bond buying

Comments late on Tuesday by Jean-Claude Trichet, European Central Bank president, that the ECB could step up its purchases of eurozone bonds have helped turn around sentiment, leading to a rally in European equity and sovereign debt markets.

Mr Trichet left open the possibility of the ECB significantly expanding its government bond purchases, warning markets not to underestimate Europe’s determination to resolve the escalating eurozone crisis. Some traders believe this could see the central bank announce an expanded bond buying remit on Thursday.

Prices of sovereign credit default swaps – a measure of the risks of a sovereign default – rallied strongly on the back of Mr Trichet’s comments. Five year CDS spreads fell 60 basis points to 484bp on Portugal and were 43bp lower on Spain trading at 322bp...