ECB Agrees On €20 Billion Weekly Upper Limit To Sovereign Bond Purchases

Tyler Durden's picture

In diametrical contrast to the rumor that the ECB and the IMF would collaborate to bail out the insolvent continent whereby the ECB prints and the IMF distributes, something which every German on record has said will not happen, we now get news from German newspaper Frankfurter Allgemeine that the ECB has agreed on a €20 billion cap on sovereign debt purchases: something which means all chimeras of an all out monetization orgy can once again be summarily short down. Bloomberg reports: "European Central Bank governing council members have agreed on a 20 billion-euro ($27 billion) weekly upper limit for sovereign debt purchases as resistance among members grows, the German newspaper Frankfurter Allgemeine Zeitung reported. The ECB council meets every other week to decide on an upper limit for bond purchases used to stem rising yields as the European debt crisis widens, the newspaper reported, without saying where it obtained the information. Members met again late yesterday to discuss lowering the level, FAZ said. Council members from the Netherlands and Austria have added their voices to skepticism over the bond-purchase program, the newspaper said. Those objecting to buying include Bundesbank President Jens Weidmann, Executive Board member Juergen Stark and Yves Mersch, governor of Luxembourg’s central bank, FAZ said." Ah, to loosely paraphrase Amadeus, "the Italians Germans... Always the Italians Germans."

And from the FAZ, Google translated:

In the markets, many investors cherish the hope that the European Central Bank (ECB) on the creditor of last resort for the euro countries and their purchase program dramatically expands. But within the Council of the ECB, which comprises the six members of the Board and the 17 national central bank governors, the resistance is growing against the program. Advocates for the abolition still only a minority, including the German Bundesbank President Jens Weidmann, the Luxembourg central bank governor Yves Mersch and ECB director Juergen Stark.

 

Also Council Members from the Netherlands and Austria have recently been critical. The majority for a continuation of the program is so fragile. On top of that seeps through now that the Council every two weeks agreed to a ceiling on the weekly bond purchases.

 

Could very existence of this limit, which exists since the beginning of the program is in central bank circles treated as a secret because they fear that this is to encourage speculation. According to the Frankfurter Allgemeine Zeitung, the growing skepticism in the Governing Council towards the loan program has meant that the ceiling was lowered to 20 billion €.

 

This Thursday, the Governing Council met and also negotiated a further reduction. The result of the vote was at the editorial close unofficially not to bring in experience. A spokeswoman for the ECB would not comment on the matter. The bond purchase program was launched in May 2010, initially in favor of Greece.

 

Instead, the Council of the ECB appears to impose a countervailing trend. For the past week, as yields on Italian government bonds at times 7.5 percent reached, had some market participants suggested spending 20 to 30 billion euros - as it turns out, would have been so much covered not by the decision of the Governing Council.

 

Instead, had intervened, the ECB and national central banks of the euro system with only 4.5 billion euros. In his first public appearances also tried the new ECB president Mario Draghi to dampen expectations. Only required banks and investors that the Fed intervene with a lot of money. But if they only do this, it would mean they would no longer be credible, it said in the past few days surrounding the ECB.

We give the machines 15 minutes before they comprehend the significance of this news.

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misterc's picture

Wow, just 0.96 trillion € of monetization every year. Price stabeleteeeeee!

Great Unwashed's picture

20 bil./wk is quite a bit, no? The last failed Spanish auction only tried to raise 4 billion. The ECB could have bought the whole thing, and then done the same every day of the week.

junkyardjack's picture

What I'm guessing is that there is a hell of a lot more debt that is already floating out there which is causing insanity with their yields so them covering the new issuances wouldn't help much.  But I'd be interested in hearing someone's explanation because it does seem like it would cover their new issuances so while it would be lipstick on a pig would it be enough to kick the crisis down the road a little bit longer.

Common Man's picture

The 20 bil/wk limit (i.e. target) applies to ECB meddling in the primary and secondary markets. When you see the PIIGS + FAAArce yields soaring, its the ECB that jumps in to the rescue. This capacity to rescue now has an upper limit....thats the "comprehend the significance of this news" TD's talking about

CM

AngryGerman's picture

6 weeks until Xmas, i.e. €120 billion to go. They can buy a lot of Greek, Portugese, Spanish, and Irish bonds with that. They cannot buy a lot of Italian debt with it. Good-bye.

OutLookingIn's picture

Okay. Let me see if I got this right. Bear with me now!

The ECB uses EU bonds it has purchased, with freashly minted Euros, from member countries as collateral. To issue new ECB bonds that it "lends" to the IMF so that the IMF may "lend" more money to EU countries who are insolvent, who sell more bonds back to the ECB so they can pretend that they are solvent?

I'm going back to bed. My head hurts!

topcallingtroll's picture

Good job sorting this all out, although your inappropriate use of a period threw me and messed up the meaning.

Keep your eye on the pea no matter how many times they shuffle the shells.

chrisina's picture

20 bill./wk is more than enough to buy all new issues of PIIGS + F public debt:

 

PIIGS + F public debt = 5 Trill.

ave. maturity = 7 years = 364 weeks

 

ave. weekly issuance of PIIGS+F debt = 13.6 bill. 

 

as a matter of fact, they don't even need to purhcase any of that in order to maintain PIIGS + F sov. bonds rates capped : just send a credible signal that they stand ready to purchase those quantities if rates go above the cap. Signal they are sending now...

sampo's picture

So that's 1040 billion next year, eh?

topcallingtroll's picture

I think someone just rang the bell. Did you hear it?

Risk is so ON!

Eally Ucked's picture

They meet every 2 weeks to make new decisions.

Overflow-admin's picture

Sure, this 20 billion weekly cap is the end of the monetization scheme /sarcasm

GeneMarchbanks's picture

'We give the machines 15 minutes before they comprehend the significance of this news.'

It means we're in for a Merry Christmas this year doesn't it?


Mike2756's picture

yep, sanity clause has some oil revs to recycle into EU debt.

Paralympic Equity's picture

There is also the unwritten cap at 7% yield for Italy 10Y

Cdad's picture

Might take 20-30 minutes for the machines to realize the significance of the story, Tyler.  Some seriously dumb ass commodity traders are currently enjoying the joy joy, old rumor, complete farce bullshit bounce this morning, being bailed out on their momentum stupidity from yesterday again [and again and again].  Let's call it 25 minutes....mark...

transaccountin's picture

capitalism is long gone

ArkansasAngie's picture

And it is time for us to exert moral hazard on those who perpetrated that policy.

 

topcallingtroll's picture

Moral Hazard?

I prefer to exert some Iron Maiden. Those poky things hurt more.

firstdivision's picture

Don't look now, but oil is back over $100, that's bullish for discretionary spending.

GeneMarchbanks's picture

People doin' a lot of driving today so... there's your causality.

repete's picture

Price of Molotov Cocktails is going through the roof.

Ted Baker's picture

THESE ARE THE NEO NAZIS (JENS WEIDMANN, JUERGEN STARK, YVES MERSCH, NETHERLANDS AND AUSTRIA) THAT THEY ARE DESTROYING THE EURO AREA AND CAN ULTIMATELY DESTROY THE ENTIRE WORLD...GET RID OF ALL THESE SUCKERS...

 

 

AngryGerman's picture

ey, is that you bunga. you want my money bitch?

Carlyle Groupie's picture

Time to inject a Bird Flu variant into the population.

bugs_'s picture

20Bx52W=1T QE3 via Eurozone.

scatterbrains's picture

benny/oblama buying spoo with money out of thin air but no worries they'll inflate those digits away, in fact one day after it's discovered what they did the U.S. will have made money on those trades..  half way to Weimar but still.. they are our future heros guys be nice.

css1971's picture

Sounds like a target more than a limit.

 

80 billion a month?

GeneMarchbanks's picture

Wait a sec, the UK and US owe nothing to one another? You don't say.

repete's picture

Would you fuck me for $1,000,000?

Yes.

How about $100

What do you think I am? A Whore?

We've already decided what you are, now we're negotiating the price!

Cult_of_Reason's picture

The stupid dog stock market (futures traders) chases every offer to celebrate Spanish 10-year yields (currently 6.8%) spiking above Italian yields (currently 6.6%)

Europe is fixed again!

scatterbrains's picture

well it is Spain's turn to install a technocrat after all... need to exert a little pressure.

Cult_of_Reason's picture

A lot of bulls were positioned for a breakout and Santa Clause rally (~80% of the trading community).

Now they are in the trap and desperate for any rumor/news to bail them out.

Roy T's picture

 

I saw some hedge fund manager on one of the channels with a recommendation to "play the Santa Claus rally by the book"

 

  Umm, ok.

BennyBoy's picture

Why that's only 2.9 billion euros a day.

A monetization bargain!

Everybodys All American's picture

The IMF is setting itself up to be the one world's Federal Reserve ... I wonder if everyone has figured this out by now.

AngryGerman's picture

they need a purpose. they lost their original one with the end of bretton-woods. Nearly 40 years of preparing a world government, and now the time has come.

jcaz's picture

Wow, hadn't thought of that until Steve Liesman blurted it out awhile ago.....  Next Stevie will come to the conclusion that the Fed may have to print if there is further decline in confidence....

Scintillating....

aleph0's picture

 

 

 

Eurozone debt web: Who owes what to whom ?

http://www.bbc.co.uk/news/business-15748696

 

Debt is debt ...  even if it's Circular !

Net all the Debt, and the Bankster & Politicians are out of business !

.. which is why we have so much !

g speed's picture

its not the debt--its the interest!

max2205's picture

Sounds like a bad "Frankfurter"

chaartist's picture

Who the fuck gave them this mandate, also national governments broke all laws that we now backstop other countries debts. Who the fuck they think they are. This is unbelievable. Germans please vote Merkel down asap and go to DEM, so we can all live with our own national currencies. 

Peter K's picture

It took the Soviet Union 70 years to collapse. The Euroland Union woun't take that long:)

spanish inquisition's picture

I will guess everyone in Europe is scrambling to change their bond auctions to Mondays.

fourchan's picture

ecb is going to force the screw job away from them and on to the usa. we are fucked.

bartek's picture

€1 trillion of printing per year. This is the end of Eurozone as Germany will leave.

The only way for Eurozone to stay intact is 0 monetization and 50-70% default across the board.

gatorengineer's picture

This will send the markets up 4 or 5 percent today, Im big time short..... I am big time F'ed...............  A trillion a year solves all of the EU....... Print on Bitchez......... Germany is TOAST.........