ECB Unleashes (Covered) Bond Buying Program, Sovereigns Sell Off

Draghi, we have a problem. Just as Coeure 'promised' the ECB, according to The FT [9], began its bond-buying program this morning. However, peripheral sovereign bond-buying front-runners banking on the ECB greater fool to offload to are disappointed as they are go no easy money love. The initial program is covered-bond-buying (similar to US MBS, but a considerably smaller market) and the ECB will reveal how much it has bought each Monday afternoon (starting next week). Greek bonds are suffering the most with 5Y yields at cycle highs once again and prices at lows (vanquishing all of Friday's gains).

As The FT reports, [9]

The European Central Bank has started to buy covered bonds, launching its latest attempt to stave off a vicious bout of economic stagnation in the eurozone.

 

The purchases are the first in a bond-buying programme that is expected to see the ECB place billions of euros of covered bonds and asset-backed securities on its balance sheet over the next two years in an attempt to revive lending and growth across the region.

 

The ECB confirmed that the central bank had begun purchasing the assets on Monday. The purchases of asset-backed securities are expected to start later this year.

 

The central bank will reveal how much it has bought every Monday afternoon, starting next week.

And the disappointed sovereign front-runners continue to sell...

[10]

and 20 mins later...

[11]

As Greece implodes back to higher yields and lower bond prices...

[12]

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Of course, do not forget that the ECB has already changed its mind and changed it back on exactly which bonds are eligible for its buying program - as we detailed here. [13]

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None of this should be a surprise - remember what happened the last time the ECB bought sovereign bonds...

Spanish and Italian bond yields (upper pane) blew wider as the volume of ECB bond buying (lower pane) picked up... [14]

[15]

Charts: Bloomberg