Tuesday 12 December 2017

ECB buys Irish debt as yield spread reaches record

The European Central Bank bought Irish government bonds today, according to three traders with knowledge of the transactions.

The ECB purchased bonds with maturities of less than 10 years, the traders said under condition of anonymity because the deals are confidential. A spokesman for the central bank in Frankfurt declined to comment.

Irish 10-year bonds tumbled for the 11th consecutive day, sending the difference in yield, or spread, with similar- maturity benchmark German bunds to a record 554 basis points, or 5.54 percentage points, according to Bloomberg generic data.

The Portuguese-German 10-year yield spread also widened to an all- time high.

The ECB’s bond-buying program differs from so-called quantitative easing policies pursued by the Federal Reserve and the Bank of England because the central bank mops up the liquidity created by the purchases, meaning the net effect on the money supply is neutral.

The ECB began the program on May 10 to stabilise markets rocked by the region’s sovereign-debt crisis. The purchases were part of a European Union-led push to rescue the euro, which fell to a four-year low on June 7 after Greece’s near default raised concern that some nations in the region would struggle to finance their budget deficits.


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