Last Week The ECB Bought A Whopping €2.7 Billion In Sovereign Bonds
When we announced last Monday that in the week ended December 6 the ECB bought €2 billion in bonds via its SMP program, we expected that the current week would see yet another major surge in bond purchases, due to last settlements. Sure enough, according to just released ECB data, in the last week when bond turmoil was already supposedly contained, the ECB bought nearly €2.7 billion in Irish, Portuguese and possibly Spanish and Belgian bonds: this is the highest amount since the first 2 weeks of the SMP program's inception and the highest by far in the past half year. Recall that while the absolute number is not large, it is material in relative terms as the European monetization scheme is the absolute fall back plan- don't forget the ECB funds domestic banks directly to in turn purchase sovereign bonds in the primary and secondary markets directly, very much like how our Primary Dealers operate in the US during UST auction time. As Zero Hedge reported last week, the only buyer of sovereign debt, via its MS proxy, is now the ECB. How long this centrally planned floor on prices persists will be up to bond vigilantes. Today, peripheral yields in both cash and CDS have once again started leaking wider, which can only mean one thing: many, many more purchases coming.
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