ECB Bond Purchases Falling Off

The ECB has released its latest weekly financial statement, the only source of public information in relation to what’s happening with its sovereign bond purchase program.

It is notable that the program has purchased smaller amounts with each passing week: €16.3 billion during the week ended May 14, €10.4 billion during the week ended May 21, €8.8 billion during the week ended May 28 and €4.9 billion during the week ended June 4. We know that some members of the Governing Council would like the program to end quickly. At this rate of decline, it will be over in a couple of weeks.

24 replies on “ECB Bond Purchases Falling Off”

It may be early days yet! The ECB’s purchases to date have been small, E40bn is equivalent to less than 0.5% of euro area GDP. The Bank of England’s purchases of gilts under its Asset Purchase Facility amounted to the equivalent of c15% of UK GDP…the Fed’s asset purchases, albeit mainly though not exclusively mortgage backed securities, c12.5% of US GDP. According to Trichet, the “functioning of the market for government bonds is central to the transmission of the ECB’s policy rate…interest rates on government bonds influence financing conditions within the economy…”. Bond yields on Greek, Portuguese, and Irish government debt are lower now than immediately before the ECB intervened but they have risen again over the past week or so, while Spanish yields are actually higher.

Our ten year bond seems to have steadily increased over the last month though. Now at around 5.1%. It’s gonna be a long summer.

I presume that the SPV is about to take over the bond-buying duties. In any case, we’ll always have repos!

In the news today:

“Responding to intense questioning today by MEPs in the European Parliament, ECB chief Trichet defended vigourously his Central Bank’s current bond-buying exercise against charges of encouraging irresponsible fiscal behaviour and setting dangerous inflationary precendents.

‘What we are doing is not at all like printing money,’ Mr Trichet told the Parliament’s Economic and Monetary Affairs Committee. When asked to explain why not, he responded,

‘When a Central Bank prints money, it knows what it is doing. We, on the other hand, have no clue what we are doing.”

I can’t quite see whether or not this was sterilised by the sale of something, although it is a funny coincidence that the amount of banknotes increased by approximately the same amount…..

Is this really all the information that can/will be given regarding billions of euro?

@ Jesper

it was sterilized, theorethically, via a 1wk deposit the ECB has taken in off the market for the exact same amount. Rate had been 0.28% over the last few weeks, up to 0.31% in today’s announcement.

@ Ribbit

Eh, where are you seeing that? Googled, Bloomberged and ECB-home-paged it, and im coming up with nowt. In fact, Trichet hasn’t been in front of the EU Parliament for a couple of months now i think…

@Joseph, Eoin:
Given the unlikelihood of any official’s saying “We, on the other hand, have no clue what we are doing.”, I think you will find that what Ms (or Mr) Ribbit wrote was what we linguisticians call a “joke”.


Ribbit only offence is to shout “look the emporor is not wearing any clothes”. The fact that so many poster actually thought Trichet could have said this illustrates what people really believe but are afraid to articulate.


Ribbit is spot on – looks like Trichet has finally decided to join the O’Rourke School of Economics – and to tell it as it is. I view this as a positive development – a blast of realism at last. There is hope …

Tuesday, June 8, 2010 via NakedCapitalism
Satyajit Das: Even More Crunch-Porn and Crash Lit

Satyajit Das …. cites P.J. (not Kevin; any relation?) O’Rourke who described economics as “an entire scientific discipline of not knowing what you’re talking about.”

Worth a good scan:


Well its not that we fear Ribbit is right, rather, we all wish that the ECB has ‘no clue’, because with such desperate measures we know there is an awful alternative lurking. We are headed to a massive collapse of sovereign bonds in europe without more ECB intervention. Of course Trichet’s ECB needs to grow far more aggressive and even buy French bonds soon to stop a market meltdown (just look at the spike in French-German spreads). The Germans can’t stop the ECB issuing money to do that. Trichet is clearly satisfied with his “overwhelming majorities” that regularly exclude Germans – Sarkozy, Berlusconi, Zapatero now run the show. Maybe Ribbit was really pointing to what Trichet wants us to hear while the ECB steadfastly takes the inflationary route: I have no clue, I promise!

In deflationary spirals, sterilizations are unnecessary!

Borrowing from Peter to pay Paul creates paper profits for bankrupt entities, but only in the short term. Long term we get Japan! Writing off some of the banks and most of the unrepayable debt is inevitable but that will only happen in the long term after those who made their money have found a sound place for it. Then there will be slow growth. The USA has lied for years about growth and employment. Soon they will be lying about 1% growth.

Life style changes coming!

Folks, it was only a little joke – I thought that was obvious….sorry for the confusion

I thought it was funny Ribbit. If people really thought that the head of the ECB came out publically and said that they didn’t have a clue what they were doing or they started looking for deeper meaning in your statement, then that’s not your fault!

@ Ribbit/Gavin

i didnt think he said it, or at least not like that, thought there might have been a missing context or even a clarification etc. Still, we live in bizarre times n all that, can’t rule anything out these days!

I think I had a sense of humour transplant at around the same time I was last listening to our dear leader talking. When I hear some of the stuff our two Brians come out with, nothing surprises me any more in terms of some of the stupid things that get said.

Guess it is a sign of the times alright Eoin. Considering some of the rubbish I read these days (and not just from politicians) anything is possible.

Comments are closed.