FRANKFURT (MNI) – The European Central Bank said Monday that it
purchased E1.384 billion in government bonds in the week ending Friday,
October 1.
The central bank thus dramatically ratcheted up its purchases of
government securities after having bought E134 million worth of bonds in
the previous week.
The increase in ECB purchasing came as sovereign debt markets were
rocked by turbulence stemming from worries about the cost of Ireland’s
bank bailout and the size of its deficit. Spreads on Irish sovereign
debt widened last week to record highs before tightening somewhat at the
end of the week after the government in Dublin announced a new plan for
coping with its seriously troubled banking sector.
The concerns carried across borders, as spreads also widened
sharply on Portuguese and Spanish debt.
On Tuesday, the ECB will reabsorb E63.5 billion in cumulative
purchases of government bonds via a quick tender to collect one-week
term deposits, the central bank announced Monday.
The total is equivalent to the number of bonds purchased through
the Securities Market Program and settled as of last Friday, rounded to
the nearest half billion.
The operation, to be conducted on Tuesday at 9:30 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. These fixed-term deposits can be used as collateral for the
Eurosystem’s credit operations, the bank said. The ECB intends to hold
another liquidity-absorbing operation next week, the bank said.
— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —
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