VIENNA (dpa-AFX) - The pricing of the euro rescue fund's last bond issuance and the lack of progress in leveraging its lending capacity, displayed the limits of the fund's ability to support European government bond markets, Moody's Investor Service said Monday.
Last Monday's EUR 3 billion, 10-year bond issuance by the European Financial Stability Facility (EFSF), in support of Ireland, was met with significantly less demand than a similar bond issuance on June 15, the agency said.
According to Moody's, investors' cool reaction to proposals to leverage the EFSF's lending capacity, through partial default insurance and/or a special-purpose vehicle, contributed to the weak demand.
However, the rating agency said that these leverage options will not affect the EFSF's AAA rating. The auction took place at a time of significant uncertainty created by the political turmoil in Greece and, to a lesser extent, Italy, which inevitably depressed demand for euro area debt, Moody's noted.
Earlier, the Sunday Telegraph reported that the EFSF, during last week's auction, resorted to buying up its own bonds worth several hundred million euros to meet the target.
Copyright RTT News/dpa-AFX