RTRS: ECB keeps bond buys on hold, prepares new programme
(Reuters) - The European Central Bank bought no bonds last week as it works out plans to launch a new and more transparent scheme for purchasing sovereign debt that will be tied to intervention by the European rescue funds and political action.
In response to a renewed intensification of the debt crisis with Spain and Italy now at its centre, ECB President Mario Draghi said on August 2 the ECB may buy more government bonds, but only once countries had turned first to the region's rescue funds for help and agreed to strict conditions.
Some investors were disappointed by the lack of immediate ECB action after Draghi had raised their expectations a week earlier by saying the ECB would "do whatever it takes" to save the euro, which had eased Italian and Spanish borrowing costs.
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There are signs that the delay could be due to lack of unanimity within the ECB Governing Council.
"We all agree that specific conditions must be met before we can intervene. However, the ECB directors have different opinions over those conditions," Belgian central bank Governor Luc Coene was quoted as saying in De Tijd.
The difference between 10-year Spanish or Italian bonds rather than two-year paper has also ballooned since Draghi said the new programme would be different from the first and would, for example, focus on shorter-dated maturities.
The ECB has barely used its existing bond-buy plan this year and has bought no bonds for 22 weeks despite an intensification of the euro zone debt crisis. The bank has grown more wary of the risks involved and doubtful of the programme's impact.
No previously bought bonds matured last week, and with no new purchases last week, the amount the ECB has spent since starting its Securities Markets Programme (SMP) in May 2010 remained at 211.5 billion euros.
This could change with the new programme. By joining forces with Europe's rescue funds, the ECB aims to complement the funds' firepower while pressure is kept on governments to reform.
As usual, the ECB will take the same amount as weekly deposits from banks on Tuesday to counterbalance the buys and neutralise any threat of them fuelling inflation.
(Reporting by Sakari Suoninen, additional reporting by Ben Deighton in Brussels)
