FRANKFURT (MNI) – The European Central Bank announced on Monday
that it had settled no bond purchases in the week ending September 7,
bringing an official end to its Security Market Program after 26 weeks
on the shelf.
As a result, the cumulative total still on the bank’s balance sheet
remained at E209.0 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 Tuesday at 0930 GMT/0530 ET, will be
conducted as a variable-rate operation with a maximum bid rate of 0.75%,
the ECB said. The fixed-term deposits can be used as collateral in the
Eurosystem’s credit operations.
The ECB said it would hold another term-deposit tender on next week
Tuesday to sterilize SMP bonds still on its books.
The ECB on Thursday announced the termination of the SMP after
presenting its new bond buying initiative dubbed Outright Monetary
Transactions (OMTs). “The liquidity injected through the SMP will
continue to be absorbed as in the past, and the existing securities in
the SMP portfolio will be held to maturity,” the central bank said in a
statement.
The ECB hopes that the new program will be far more effective than
the SMP in permanently reducing sovereign refinancing cost as it bond
market intervention will hinge on prior commitments by governments to
pursue reforms. As opposed to the SMP, which as always been described as
limited in scope and time, the ECB said there is no ex-ante limit for
bonds purchased under the OMT.
— Frankfurt bureau: +49 69 720 142; email:frankfurt@mni-news.com —
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