The last few minutes have seen markets taking a decidedly negative stance. Led by FX carry, risk-assets in general are rolling over. Some attributed it to Bernanke waking the devil from his slumber:
- *BERNANKE SAYS VULNERABILITIES REMAIN IN FINANCIAL SYSTEM
but it appears that the decision of Germany's Top court is the market-moving event:
- *BUNDESBANK REJECTS OMT IN OPINION FOR TOP COURT: HANDELSBLATT
Instantaneously EUR is tumbling, financials are dropping, and the 'promise' of Draghi's tail-risk killer is perhaps being removed. Remember, the high court is due to vote in June on whether the ESM is constitutional under German law and this rejection of 'OMT' leaves that decision much more in limbo than the market was expecting.
[4]
Via Bloomberg:
German Bundesbank comments on the ECB’s bond-purchase program in a confidential opinion prepared for German constitutional court, Handelsblatt reports in an pre-release of an article to be published tomorrow. [5]
- Bundesbank rejects potential sovereign bond purchases because they would constitute “targeted” acquisitions of securities of “worse credit standards” and increase risks for the central bank: Handelsblatt
- Bundesbank says outright monetary transactions could undermine independence of central banks
- Bundesbank doubts that strong conditionality will be imposed on countries in exchange for aid
- Bundesbank says the Greek experience “is reason for concern that the handling of conditionality within the framework of the OMT rogram, even in questionable cases, won’t protect against significant purchases and thereby against a redistribution of risks across the balance sheets of the Eurosystem”
- Bundesbank says diverging borrowing costs for companies in different countries may reflect different fiscal risks of sovereign
NOTE: German constitutional court announced it will examine ECB bond-purchase program
Of course, Draghi can just say 'Yes' to this 'Nein' but the points the court raises for the BuBa are hard to argue with...