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Monday, December 20, 2010

ECB Bond Purchases Drop to Lowest in Almost Two Months

ECB Bond Purchases Drop to Lowest in Almost Two Months ; The European Central Bank bought the least amount of bonds in almost two months last week after it called on governments to do more to ease the region’s debt crisis.

The Frankfurt-based ECB said it completed 603 million euros ($794 million) of purchases after settling 2.667 billion euros the previous week. It will take seven-day term deposits tomorrow to neutralize 72.5 billion euros of liquidity created by bond purchases since the program started on May 10, it said today.

The ECB said on Dec. 2 that it will extend emergency liquidity measures for banks after Ireland’s aid package failed to convince investors about governments’ ability to push down budget deficits and prevent a breakup of the 16-member region. With the ECB describing the bond program as “temporary,” President Jean-Claude Trichet has said governments must step up efforts to stem contagion and restore confidence.

“The figure is slightly disappointing,” said Cyril Regnat, a fixed-income strategist at Natixis in Paris. “However, the ECB will probably accelerate its purchases again early next year.”

The ECB only publishes the amount of purchases settled each week, without disclosing details. The so-called Securities Markets Program aims to smooth the functioning of some bond markets to improve monetary-policy transmission.

ECB council member Ewald Nowotny from Austria said on Dec. 10 that the bank’s unconventional measures “can’t become normality.” His Luxembourg colleague Yves Mersch said the same day that monetary policy “can’t be overburdened,” and “we can’t blur the line between monetary and fiscal policy.” For the latest updates PRESS CTR + D or visit Stock Market news Today

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