Eurozone Debt Spiral: Euro zone debt rallies as ECB eases collateral rules, Fed

Euro zone debt firmed across the board on Thursday after the European Central Bank eased its collateral rules and as the U.S. Federal Reserve's flexible approach to reducing its bond purchases soothed investor nerves.

The ECB said it was expanding the list of asset-backed securities that are eligible for use by banks in exchange for its cheap loans and reducing the discount it applies to these assets.

Yields on debt issued by Italy and Spain, whose banks are seen benefiting most from the ECB move, extended falls. Italian yields fell 8 basis points 4.42 percent with the Spanish equivalents down by a similar amount at 4.62 percent.

"The market is taking it positively... because the ECB has been looking to do something and now has finally moved, but in essence it's not a great change," said RBS strategist Michael Michaelides.

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