July 27, 2011 / 8:36 AM / 8 years ago

EURO GOVT-Peripheral EMU CDS rise on doubts over EU rescue fund

LONDON, July 27 (Reuters) - The cost of insuring Italian and Spanish government debt against default rose on Wednesday after Germany’s finance minister added to investor doubts on the scope of the EU’s rescue fund to buy bonds in the secondary market to support struggling sovereign issuers.

Finance Minister Wolfgang Schaeuble said Berlin was against a carte blanche for the European Financial Stability Facility to purchase bonds on the secondary market .

“The lack of clarity on the new role of the EFSF and the execution risk involved with the EU plan are weighing on the market,” said Gavan Nolan, an analyst at CDS data provider Markit.

Five-year credit default swaps (CDS) on Italian government debt rose 22 basis points on the day to 295 bps, according to data monitor Markit. This means it costs 295,000 euros to protect 10 million euros of exposure to Italian bonds. Spanish and the rest of the peripheral euro zone CDS also rose. (Reporting by Emelia Sithole-Matarise)

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