FRANKFURT (MNI) – The European Central Bank slowed its activity in
the sovereign bond market last week, buying E713 million of sovereign
securities, the ECB announced Monday.
One week earlier, the central bank made E1.073 billion in bond
purchases.
The ECB said today it will reabsorb E66 billion Tuesday in a quick
tender to collect one-week term deposits.
That total represents the volume of bonds purchased through the
Securities Market Program — the formal name of the bank’s bond-buying
program — and settled as of last Friday, rounded to the nearest half
billion.
The operation, to be conducted on Tuesday at 10:30 GMT, will be in
the form of a variable-rate tender with a maximum bid rate of 1.00%, the
bank said.
The liquidity will be held for one week at the bank as a term
deposit. The fixed-term deposits can be used as collateral in the
Eurosystem’s credit operations, the ECB said.
The central bank also said it intends to hold another
liquidity-absorbing operation next week.
After staying on the sidelines in its bond purchase program for
three weeks in October, the ECB has picked up purchases in recent weeks,
likely as a consequence of the intensification of the sovereign-bond
crisis on the Eurozone’s periphery, particularly in Ireland.
Now that Ireland has requested a rescue package, it’s possible
markets will calm down enough to allow the ECB to reduce its bond buys
or sit it out altogether.
But that’s not certain: after an initial market bounce this morning
in which the euro rose and peripheral spreads narrowed, the feel-good
factor dropped off abruptly in the afternoon as the Green Party in
Ireland, a member of the coalition government, called for new elections
and Moody’s threatened a multi-notch downgrade of Irish paper. Clearly
the sovereign debt crisis is far from over.
— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —
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