Although there have been no further indications by Spain that it would ask for EFSF/ESM help at this stage, Barclays Capital expects such a request to come before the beginning of September.
That would pave the way for the ECB intervention to curb the rising of the Spanish government bonds, but won’t take away alot of the related uncertainties, Barclays adds.
Chief among these uncertainties are 1) the conditionality attached to the ECB intervention; 2) the actual modus operandi of primary and/or secondary market buying by the EFSF; and 3) the impeding decision by the German Constitutional Court on the ESM.
In the meantime, Barclays sees the short peripheral yields since the ECB meeting suggesting that markets think intervention will be up to the 2-3 year sector. Thus, if and when appropriate EFSF/ESM intervention is put in place, longer-end rates could start rally as well, Barclay concludes.