ECB Sovereign Bond Buyback Tally: €47 Billion And Rising

The ECB has announced that new bond purchases that settled in the past week amount to €6.5 billion, bringing the total to €47 billion. This amount likely accounts for the various "successful" auctions in Spain, Portugal and Italy. The €6.5 billion is higher than the €5.5 billion in incremental bonds that had settled in the prior week. As a result, the ECB will now conduct another fresh (and "quick") term deposit tender on Tuesday at 9:30 GMT, to drain the incremental liquidity from all the recent bond purchases, thus continuing the path of acute schizophrenia as the bank is worried as being seen too easy in its monetization ways by a hawkish (but increasingly less so) Germany. Lastly, "The ECB intends to carry out another liquidity-absorbing operation next week" - after all there are ongoing sovereign auctions in Europe that have no other bids aside from the ECB.

From the ECB:

As announced by the Governing Council on 10 May 2010, the ECB will conduct specific operations in order to re-absorb the liquidity injected through the Securities Markets Programme. In this regard, the ECB will carry out a quick tender on 15 June at 11.30 in order to collect one-week fixed-term deposits with settlement day on 16 June. A variable rate tender with a maximum bid rate of 1.00% will be applied and the ECB intends to absorb an amount of EUR 47 billion. The latter corresponds to the size of the Securities Markets Programme, taking into account transactions with settlement at or before Friday 11 June. The benchmark allotment amount in MROs takes into account the liquidity effect of non standard measures, assuming an unchanged size of the Securities Markets Programme and full sterilisation of this amount via the above mentioned liquidity-absorbing operation. Fixed term deposits held with the Eurosystem are eligible as collateral for the Eurosystem's credit operations.  The ECB intends to carry out another liquidity-absorbing operation next week.


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