FRANKFURT (MNI) – The European Central Bank drastically increased
its purchases of sovereign EMU debt last week, the central bank
announced Monday.
The bank said it purchased E2.313 billion bonds through last
Friday, its highest weekly total since December 10. The amount was well
above the E113 million in purchases made the previous week.
The announcement comes amid some easing of tensions on the
Eurozone’s periphery. Last week, Portugal sold 10-year bonds at a yield
below 7%, passing what was considered a key test in its ability to
refinance without external aid.
This yield is considered the threshold level which Greece and
Ireland both breached prior to requesting aid from the EU and IMF.
Earlier today, the Greek/German 10-year spread went below 800 basis
points, the narrowest spread since October 28. Other peripherals were,
however, marginally wider versus the German Bund during afternoon
trading in Europe.
Though the ECB never comments on its specific purchases, there is
little doubt that its intervention in the government bond market is
helping to cap yields on the embattled periphery.
The ECB’s bond purchases made over the past week increased the
total amount of bond buys to E76.5 billion, rounded to the nearest half
billion, which the ECB said that it would reabsorb in a quick tender to
collect one-week term deposits.
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 central bank also said it intends to hold another
liquidity-absorbing operation next week.
— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com —
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