FRANKFURT May 6 The European Central Bank
failed to fully offset its past purchases of government bonds on
Tuesday, missing its target for the fourth week running despite
banks stocking up on cash and money market pressures easing.
The ECB has been taking an amount equal to its holdings of
euro zone government bonds as weekly deposits from banks to
neutralise any threat that the purchases - made at the height of
the euro zone's debt crisis - will fuel inflation.
But many banks are repaying early loans they took from the
ECB as the crisis escalated, and have set aside tens of billions
of euros before an ECB health check of the sector, leaving them
less cash to deposit at the central bank.
The ECB drew back 165.533 billion euros ($229.73 billion) on
Tuesday in seven-day deposits, just below a target of 167.5
billion, equivalent to its first and now terminated sovereign
bond-buying plan, which fell in size last week as bonds matured.
The ECB earlier this year debated ending the sterilisation
operations to help loosen lending conditions and counter low
inflation in the 18-country currency bloc.
The Securities Markets Programme (SMP) was replaced by a new
and yet-to-be used bond-buying plan dubbed Outright Monetary
Transactions (OMT) in September 2012. The ECB holds the bonds it
bought under the SMP to maturity.
Earlier on Tuesday, banks took 129.14 billion euros in
weekly loans from the ECB, less than the 140.0 billion euros
traders polled by Reuters had expected.
Banks had taken 172.621 billion euros at last week's
refinancing operation, however, the largest amount since June
2012, replenishing their cash positions and easing upward
pressure on euro zone overnight bank-to-bank lending rates.
That helped boost excess liquidity, the money
banks hold in excess of their daily operational needs, which had
fallen to levels last seen just before the ECB offered
three-year crisis loans to banks in December 2011.
($1 = 0.7205 Euros)
(Reporting by Paul Carrel; Editing by Catherine Evans)