FRANKFURT (MNI) – The European Central Bank announced on Monday
that it had settled E3.361 billion worth of new sovereign debt purchases
in the week ending December 16, up sharply from E625 million the
previous week.
The significant increase in ECB bond market intervention owed no
doubt to market scepticism regarding the result of the EU leaders’
summit in early December.
Questions arose last week regarding many key aspects of the
leaders’ new plan to tackle the sovereign debt crisis, including whether
Europe would really contribute E200 billion to the IMF, as they had
pledged; whether ratification of the summit accord in national
parliaments would be hampered by domestic politics and the possible need
for popular referenda, particularly in Ireland; and whether EU
insitutions could be used to enforce an agreement that circumvented the
EU treaty and was therefore outside the domain of EU authority.
As the deal showed signs of fraying, yields on closely watched
Italian and Spanish bonds edged up from their already elevated levels,
no doubt prompting the the ECB’s heavier presence in the market.
In the week ended December 2, leading up to the EU summit, the ECB
had settled E3.662 billion worth of new bond purchases, and it had
settled E8.581 billion the week before that when markets were in
something approaching a panic.
The ECB purchases settled last week bring the cumulative total
still on the bank’s balance sheet to E211.0 billion. As usual, the
central bank said it will seek to sterilize the entire amount through a
quick tender to collect one-week term deposits.
The deposit tender, to be held Monday at 1030 GMT/0530 ET, will be
conducted as a variable-rate operation with a maximum bid rate of 1.0%,
the ECB said. The fixed-term deposits can be used as collateral in the
Eurosystem’s credit operations.
— Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com
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