And to think that the market could have learned its lesson by now. Following the planting of an unsourced, glaringly obvious ECB propaganda report such as that attempted yesterday in Der Spiegel, in which nothing of substance was in fact enacted or even proposed (as rate caps is merely a regurgitation of ideas thrown out previously in the summer and fall of 2011), peripheral bonds once again tightened on absolutely nothing, with the Spanish 10 Year now back in the 6.30% territory, over 100 bps inside where it was a month ago. On not a single enacted reform or actual ECB action. Of course, it was a matter of hours before the German FinMin put an end to this latest rumor, and sure enough an hour ago a spokesman for the German FinMin said they were unaware of any ECB plan to target bond spread. Perhaps because there are none? And of course, if there were, the Germans would promptly put an end to what is my implication an open-ended bond buying program without conditionality: something that worked like a "charm" last summer with Italy. And just to make sure Germany's message was read loud and clear, here is the Bundesbank turning on the "just say 9" machine.
The Bundesbank on Monday reiterated its objection to new government bond purchases by the European Central Bank and called for strict conditionality on any new bailout loans.
"The Bundesbank maintains its view that government bond buys in particular should be assessed critically and that they come with significant risks for stability policies," The Bundesbank warned in its monthly report.
"Decisions regarding yet more pronounced pooling of solvency risks should be made through fiscal policies - that is, governments and parliaments - and should not be carried out via the central bank balance sheets," the Bundesbank said.
The German central bank warned against further weakening of conditionality on aid provided by the Eurozone's bailout funds, the European Financial Stability Facility and the European Stability Mechanism.
Additional interest rate charges on bailout loans and strict economic and fiscal policy conditions are key to maintaining incentives for bailout countries to quickly adjust and secure a return to capital markets, the report said.
"In this context the tendency towards weakening conditionality is alarming," the Bundesbank warned.
In the meantime, unanonymous sources warn that listening to anonymous sources may be hazardous for your P&L:
Germany's finance ministry is not aware of any plans for the European Central Bank to target spreads of bonds of struggling euro zone member states, a spokesman said on Monday in response to a media report.
"I am not aware of any such plans and haven't heard anything," spokesman Martin Kotthaus told a news conference.
"In purely theoretical, abstract terms, such an instrument would certainly be very problematic. But I know of no proposal along these lines," he said.
The latest edition of Der Spiegel says, without naming its sources, that the ECB is discussing interest rate thresholds for individual euro zone countries with a view to intervening if the premium over German bonds is exceeded.