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.