ECB Starts Buying German, Italian Government Bonds Under QE Plan
Bloomberg - Mar 09, 2015
With the first purchases of government bonds under a broader stimulus plan, the European Central Bank showed willingness to be patient in its efforts to reignite the euro area’s economy.
The ECB and national central banks started buying sovereign debt on Monday under the 19-month plan to inject 1.1 trillion euros ($1.2 trillion) into the economy. While purchases included bonds from at least five countries, the size of individual trades -- at between 15 million euros and 50 million euros -- was small relative to the program’s goals, according to people with knowledge of the transactions.
“The amount bought may be small to start with, but this will be like a pressure cooker,†said Ciaran O’Hagan, head of European rates strategy at Societe Generale SA in Paris. “They have just switched on the heat and we will need some time for the pressure to mount.â€
Euro-area bonds extended a 14-month rally fueled by speculation that buying 60 billion euros of debt a month will create a scarcity of government bonds among buyers of the securities. Yields already fell to record lows across the region as the Frankfurt-based bank follows in the quantitative-easing footsteps of the Federal Reserve, Bank of England and Bank of Japan.
Germany’s 10-year yield fell the most in six weeks, dropping eight basis points, or 0.08 percentage point, to 0.31 percent at 5 p.m. London time, approaching the record-low 0.283 percent set on Feb. 26.
