By: Sara Patterson

Although the ECM has restrained Italy’s borrowing costs by purchasing its debt, the country will still try to raise money in the bond market this week. This move will be a strong test as to whether the ECB has the buying power to keep yields stable. In recent weeks the European Central Bank has purchased bonds from both Spain and Italy, in a practical attempt to quash the spreading debt crisis. These purchases did succeed in bringing the nations’ ten-year bond yields down to nearly 5%. Analysts are predicting that there will be demand for the Italian bonds when they go on auction tomorrow. However, it seems clear that Italy must do more than just selling bonds in order to stave off future economic crises. Austerity measures will likely need to be enacted, and structural reform may help as well.

Elsewhere in the region, European stock prices have climbed, including those for banks in the beleaguered Greece and Italy. Italy’s Banca Monte dei Taschi di Siene SpA gained 1% to 43.7 Euro cents after it announced a profit, while National Bank of Greece rose around twenty percent to 3.34 Euro. Following a generally optimistic speech by Fed Chairman Ben Bernanke on Friday, US stock prices are expected to remain stable as well, as the Chairman vowed that he has even more resources to prevent recession in his arsenal of economic tools.