The European Central Bank has told Italy’s beleaguered Monte dei Paschi that it must come up with 8.8 billion euros ($9.2 billion), a sum significantly higher than the original 5 billion euros that the bank was expecting. Monte dei Paschi failed last Friday to achieve the investor backing it needed, and as a result, the Italian government approved a bailout of the country’s third-largest lender. The ECB noted that Monte dei Paschi is solvent, but that the bank’s liquidity position had decreased notably between the end of November and the third week of December, which caused the update in terms imposed upon the bank. CONSOB, Italy’s market watchdog (which also regulates its Forex brokers), announced that Monte dei Paschi’s bank shares and securities would be barred from trading until the terms of the bailout are solidified.
Markets Flat on Thin Trading
The euro traded 0.2 percent lower on Tuesday, hitting $1.0435. The dollar also gained against the yen on Tuesday, trading at 117.39. The yen slid after data released on Tuesday showed that the country’s core consumer prices fell for the ninth straight month in November, and that household spending decreased despite the fact that job availability hit a new 25-year high.
U.S 10-year Treasury yields continued their gains, rising almost 1 percent on Tuesday to recover Monday’s losses. This bounce boosted the dollar against its primary trading partners. The dollar index was up 0.1 percent to 103.13, only slightly below the December 2002 high it hit last week.