A Gentle Reminder Of The Effectiveness Of Prior ECB Bond Buying

Today's announcement of the third-coming of the messiah-like Draghi's Bond-Buying program - even if under a different, more catchy, name - brings to mind a chart we offered by way of genuine concern the last time he mentioned this as an option. While he insists it's different this time (because they'll tell us the CUSIPs? we already knew when they were in; because its conditional? and revocable and who trusts their data; because its at the short-end? simply crushing up sovereign funding capabilities and leaving the roll/liquidity needs even greater; Unlimited? we don't remember a limit before?), it is clear that the immediate gaps tighter in bond yields (and spreads) on the announcement of the program was the best it ever was and bonds sold off through each of the previous two SMP efforts. Just saying...

Spanish and Italian bond yields (upper pane) versus the volume of ECB bond buying (lower pane).


...which in aggregate is around the same size that the market implied it was expecting - yields moved from ~4% to over 6.5% as the ECB soaked up over EUR250bn...


Chart: Bloomberg


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