European Bond Risk Plunges As Draghi Hints At Sovereign QE (Again)

Seriously!! Draghi utters a few words - all of which we have seen and heard a thousand times before:

  • *DRAGHI SAYS ECB WILL DO WHATEVER IT TAKES, WITHIN ITS MANDATE
  • *DRAGHI SAYS EXPANDED PURCHASE PROGRAM COULD INCLUDE GOVT BONDS

and EURUSD, European stocks and bonds get uber-excited...

European bond spreads tumbled...

 

EURUSD sliding back under 1.25

 

And stocks surged...

Charts:Bloomberg

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As a reminder, here is what Draghi said about this in his own words...

December 2011 - ECB Press Conference

 

Question: Why is it so impossible for the ECB to act like the other central banks, like the Federal Reserve System or the Bank of England? Why do you not act more directly to help European countries by buying up the debt on a massive scale?

 

Draghi: As I said before, we have a Treaty and the Treaty states what our primary mandate is, namely to maintain price stability. Also, the Treaty prohibits monetary financing. I am old enough to remember that, when this Treaty was written in the early 1990s, some of the countries around that table were actually doing what you suggest doing now, namely some of the central banks of these countries were financing the government expenditure of their governments through money creation, and the consequences were there for all of us to see. That is why, in a sense, this Treaty embodies the best tradition of the Deutsche Bundesbank, whereby monetary financing has always been prohibited.

So do not hold your breath!!!