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Dublin: 1 °C Sunday 19 January, 2020

Traders say ECB buying bonds, despite Trichet silence

The European Central Bank makes no mention of stepping up its buying – but insiders reckon they’re back at it.

BOND TRADERS BELIEVE that the European Central Bank has resumed its policy of buying up secondhand bonds in ailing Eurozone economies, despite the lack of any major policy announcement on the matter from president Jean-Claude Trichet.

The European Central Bank this lunchtime left its key interest rate at 1%, but was expected to announce radical new policy moves on bonds – which many anticipated lead to an indication that Frankfurt was to once again start spending its cash hoovering up the bonds of struggling countries, a programme it had began in May but had recently eased up on.

Trichet’s announcement, however, gave no indication of any policy shifts, and merely said that the bank would delay its withdrawal of stimulus measures, trying to keep up momentum in its efforts to reinflate Europe’s flagging economies.

Despite the absence of concrete details, however, European stock markets have spiked – and the Euro itself fallen – on the accouncement, with traders suspecting that the European Central Bank had, in fact, resumed buying bonds for weaker nations like Ireland, Portugal, Spain and Italy.

Certainly, there seems to be reason to think that there has been mass intervention in the markets:

  • Irish 10-year bonds are down by 0.384%, to 8.559% – almost 1% lower than their value on Tuesday
  • Portuguese bonds are down by 0.459%, down to 6.186% – a similarly drastic drop
  • Spanish bonds have fallen by 0.167%, to 5.122%
  • Italian bonds are down 0.077%, to 4.433%.

The spread between Irish and German bonds stands at 5.73% – its narrowest for weeks.

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About the author:

Gavan Reilly

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