FRANKFURT (MNI) – The European Central Bank’s participation in the
sovereign bond market picked up speed last week, buying E1.348 billion
of sovereign securities, the ECB announced Monday.
One week earlier, the central bank’s purchases had slowed to E713
million in bond purchases.
The ECB said today it will reabsorb E67 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.
The central bank’s intensification of bond purchases is likely a
reaction to heightened concerns about Europe’s periphery.
Ireland’s agreement to an E85 billion rescue package over the
weekend with its European partners and the International Monetary Fund
calmed markets somewhat earlier in the trading day, but as the day has
gone on, spreads have re-widened amid concerns the package is not
sufficient and worries that the government will be unable to pass the
country’s four-year budget plan.
Irish 10-year sovereign spreads hit a new post-EMU high at 652
basis points versus the benchmark German Bund earlier today before
retreating to 650 bps as traders reported that national central banks
are buying Irish bonds.
The attack on Spanish sovereign bonds has also continued into the
new week. Spanish 10-year spreads versus the Bund hit a new EMU-era high
of 261 basis points in European afternoon trading.
— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —
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