Analysts Respond To "Unsourced" Reports Of Open-Ended ECB Monetization

Tyler Durden's picture

For whatever reason, yesterday's unsourced Spiegel report that the ECB is actually contemplating open-ended monetization with arbitrary yield targets on various European nations is the talk of the town, if only for a few more hours until, just like last year, the proposal is summarily dismissed, only to be reincarnated once Spanish yields pass north of 8% again. In the meantime, it has allowed those very well paid sell-side strategists to present their erudite opinions, which naturally do not matter in the grand (and not so grand) scheme of things as long as Germany sticks to the 9-9-9 plan.


  • German press is talking of yield limits set by ECB; this is unlikely, but also clear ECB is closer to doing something more dramatic to contain things, Padhraic Garvey, strategist at ING, writes in note
  • Spain and Greece are where biggest problems lie at this juncture, while Ireland, Portugal and Italy are in better shape
  • Trading is very light, difficult to conclude anything from this at this point


  • The Spiegel report is still preliminary; eurosystem committee is most likely considering cap on spreads as one of a number of options in line with the Governing Council’s decision on Aug. 2 to design measures to “repair monetary policy transmission”, Julian Callow, economist at Barclays, writes in note
  • Would be surprised if council were to decide on Eurosystem purchases which went beyond short-end of govt curve
  • Such reports suggest moving toward forceful purchase program with combined forces of ECB and EU funds next month though formal decision may not be taken until Sept. 14


  • An ECB yield/price target is unlikely for numerous reasons, Sue Trinh, strategist at RBC, writes in note
  • Impossible to determine exact fair level; putting a number on it means ECB would need to explain how it derived the figures  and reasons for differences between countries
  • Without an announced yield target, it will have to follow a quantitative target
  • Effectiveness of such an intervention remains to be seen, especially in increasing share of foreign holdings of Italian/Spanish bonds

Standard Bank:

  • Wouldn’t be surprised to see spread limit idea used, Steven Barrow, strategist at Standard Bank, writes in note
  • Several ECB members, especially Germany, have a huge problem with ECB buying large amounts of bonds; Draghi may suggest that a limit on spreads will restrict the amount of actual intervention as mkts will observe the limits
  • Such measures could be positive for periphery bonds but only in the case where a bailout is requested; for that to happen, bonds may have to undergo some stress


  • After the talk of “major” buying if a country sought EFSF/ESM help, this latest story on ECB placing threshold above which it will buy shorter-dated peripheral bonds, is another twist, Kit Juckes, strategist at SocGen, writes in note
  • Can’t see how this will play well at Buba
  • As long as there is the sense that Draghi will somehow get ECB to buy bonds and Merkel is giving her support, the risk mood will be helped


  • Expect the reports of ECB yield/spreads cap this morning to be the first of many leaks that will result in considerable volatility in coming wks
  •  Potential for huge political pressure if spread for Italy is set at lower levels than Spain

source: Bloomberg

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GetZeeGold's picture



Like sands through the hour glass......these are the days of our monetization.


Please sign Debbie Wasserman Shultz's petition on the way out......that's one crazy bitch there.


AlphaDawg's picture

Nothing ever happens and the Eurozone will be extended and extended.

Just buy silver and forget about all this politics crap


"Money was intended to be used in exchange, but not to increase at interest. And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent. Wherefore of all modes of getting wealth this is the most unnatural."


Death and Gravity's picture

I'll ask - whats the point of having a press corps that jumps at the wildest, unsourced, speculative rumor, as newsworthy, without a shred of scrutiny or analysis?

"The plan is preliminary", my ass.

GetZeeGold's picture



without a shred of scrutiny or analysis?


It's just the finest propaganda money can's a good'll see.


You see.....the press is ever so much smarter than you are. You're welcome.

Ghordius's picture

no, there is another angle that nobody wants to point out: the 17 members are, generally speaking, led by democratic parliaments with several parties joined in coalitions. this leads to lots of discussion on the political side of a kind that is different from what the AngloSphere journalists are used to.

on the other side, generally speaking those parliaments have quite of political weight on their central banks - most of them are State Banks - with the notable exception of the BuBa that plays the valuable role of the wise Jester at Court. So this all flows into how then the ECB council will decide.

strategically, one plan is being aired in Germany about one big sinking fund

tactically, Draghi received carte blance to hit any "unwelcome speculations" on bonds

those two are the current runners for relevancy

saturn's picture

Politics is a disease. It must be cured before humans die from it. If there is a cap on bonds, then german bunds will likely immediately trade at 5% yield level - all euro bonds will converge to that cap level.

Ghordius's picture

generally speaking eurozone citizens don't agree with your "free, unfettered markets" view. just noting a fact. they like to use words like "hot money" and "evil speculation", for example

GetZeeGold's picture



My ancestors traveled an entire ocean to get away from those batshit crazy people over 200 years ago....and they keep showing up on our doorstep.


No....we don't have a cup of sugar to give you. Print your own hot money....we are. If you want to call it evil....that's on you.


orangegeek's picture

This will continue until the Euro accelerates downward, which in turn will drive the USD way up.


At this point, we should see markets decline rapidly.

vertexa's picture

The Bundesbank warns (in its monthly report) moves to share "solvency risks" in the eurozone should be decided by governments, not the ECB. The comments follow speculation the ECB is considering intervention to cap spreads between peripheral and German bond yields by buying unlimited amounts of government debt. It's a plan Germany's finance ministry denies any knowledge of but says would be "very problematic."

Dr. Engali's picture

It's the stupidity that drives me nuts. Here we are two years into this thing and the markets still respond when there is a " statement " or a " leak" with no action. When..... Oh when... are the markets going to say bullshit?

GetZeeGold's picture



It's the stupidity that drives me nuts.


Oh hell no.......that's code talk for white people wanting to bring back the KKK. We're on to you little mister!



Dr. Engali's picture

I'm pretty sure that I've been on a list for a while. After all I am a white over 40 male American citizen. That by default puts me on the list. Nevermind the fact that I frequent questionable sites like the Hedge.

Winston Churchill's picture

You are fighting normalcy bias.

Just as 95% of people went meekly to their fate in the death camps.

So it will be again.

The markets cannot conceive that their is no financially survivable

 'final solution' to the euros problems,or ours for that matter.

Inthemix96's picture

Well to be fair,

I have spent all morning deleting my German contacts from my mobile phone, it took fucking ages.

But, on the other hand, I am now Hans free.


Inthemix96's picture

Sorry doc,

I couldnt think of anything else........

If you know what I mean.......      ;-)

fonzannoon's picture

Anyone ever see the youtube of cnbc during the flash crash? I watched it yesterday and what was interesting was that the Euro had "crashed" all the way down to 1.27. Thats what Santelli was fascinated. With the Euro at 1.27 the Dow was breaking below 10k. This was all because of the dollar strength supposedly. I just find it interesting that here we are at 1.23 and the dow is 13.5k. I wish someone could put this data out there and make sense of it.

unrulian's picture

There is no sense to be had my friend

vertexa's picture


Italian cash-for-gold shops quadruple as debt crisis deepens

In a country mired in crisis, buying gold off desperate people has become one of the few boom industries.


firstdivision's picture

SPA10 about a pubic hair away from dropping into the 5's.

max2205's picture

Angry Europeans... Oops I said angry

GetZeeGold's picture



It's're just a racist. When the blue UN van shows up please get in. We'll have you feeling better in no'll see.


A Man without Qualities's picture

Merkel's government has done such a good job fooling the German people into believing that the situation is under control that they have no chance of getting the support necessary to do what they need to fix it.

Zero Debt's picture

They should learn from the US and set a high and challenging but achievable debt target./s

cranky-old-geezer's picture



Debt monetization (QE) will happen one way or another. 

5 years now we've watched over-spending governments issue more debt and it always gets bought by someone.

Lots of talk about reducing spending (austerity) but never any action.

Printing, debt buying, currency debasement, and currency collapse is the future.   Not if.  Just when.


fiddy pence haff pound's picture

Whadaya think the Goldman Sachs guys were there for? They're henchmen.

The US wants the debt go totally abstract, then digital cash, and we're finished.


Everybody thought that Germany would stand in the way with its constitutional court.

If nobody at the ECB asks the German court what it thinks, then what? Do you think

the Court is gonna shut off the German money spigot?

Look at Deutschland. The opposition says 'Eurobonds are good'. In the election,

Merkel says 'no bonds', wins , and then the gates open wide.


nobody in power wants to end the ponzi. Can you end the ponzi? They didn't teach

me that at school.