|June 20, 2012
Cheap and ready access to the liquid assets that oil the financial markets are under threat from both state-imposed capital controls and flagging confidence in the euro, said Robert Jenkins, a member of the Bank’s Financial Policy Committee.
Without easy access to liquidity, markets could seize in a re-run of the credit crunch after the collapse of Lehman Brothers, he warned.
The warning comes after it emerged last night that European leaders are poised to announce a £600bn deal to bail out Spain and Italy.
Two rescue funds are to be used to buy the debts of the troubled economies, the cost of which have reached record highs in recent weeks.
Spain and Italy's bond yields eased this morning on the news. Spain's ten-year bond yields were down 14 basis points to 6.8 per cent, after falling below the symbolic 7 per cent barrier. Italian bonds fell ten basis points to 5.79 per cent.