Comments from Knot in Spiegel Magazine:

  • ECB plans see national central banks buying their own debt
  • Draghi presented QE plan to Merkel and Schaeuble
  • In favor of putting national central banks in charge of QE
  • Fiscal transfer risk lower if national central banks buy
  • ECB must avoid decisions reserved for elected officials
  • ECB to set 20-25% purchase limit for countries’ debt
  • QE plan won’t include Greek bonds due to rating

This is as close to a pre-announcement as you’re ever going to get. The one positive I could see here is that countries might have an option about whether or not to buy the debt, that would give the Bundesbank the option to simply say ‘no’ and that would limit the effectiveness of QE.

A quick tall of the 20-25% puts a country like Italy around 250 billion euros and overall should easily get to a $1 trillion but only if the 20-25% limit is hit. The ECB could add further fuel to the fire by announcing corporate bond buys as well.

The euro is a bit higher after this news, which argues that sovereign QE is already fully priced in and that this method might give Germany a way to wiggle out of it. Or it’s a bit of ‘sell the rumor, buy the almost-fact’.