August 15, 2011 / 4:40 PM / 8 years ago

UPDATE 2-ECB reactivates bond-buy plan with record amount

 * ECB spends 22 bln euros on bonds, most in any week	
 * Analysts say record amount is not still not enormous	
 	
 (Adds Issing in paragraph 7)	
 FRANKFURT, Aug 15 (Reuters) - The European Central Bank 
spent a record 22 billion euros on government debt last week, 
reactivating its controversial bond-buying plan to try to halt 
the spread of the euro zone debt crisis to Spain and Italy.	
 The amount bought, reported by the ECB on Monday, was the 
most the central bank has spent in any week since it began the 
programme in May last year, surpassing the 16.5 billion euros 
spent in the first week, when it targeted Greek bonds.	
 Victoria Cadman, an economist at Investec, said the ECB 
would need to be active in the bond market for a few weeks yet.	
 "The ECB is doing quite a lot to pop up Italy and Spain and 
help to push down their yields. The number is relatively big, 
but it is not enormous," she said.	
 The ECB reactivated the programme after leaving it dormant 
for 19 weeks, and despite opposition from a four-man group on 
its policymaking Governing Council, led by Germans Jens Weidmann
and Juergen Stark. 	
 The four dissenters were concerned about the ECB moving into
the fiscal policy arena but the majority on the Governing 
Council felt obliged to act as euro zone governments had failed 
to come up with adequate plans to stem the spread of the crisis.	
 The dissenters' resistance was echoed by former ECB chief 
economist Otmar Issing, who told German television station ZDF: 
"This cannot be the task of a central bank. If it gets involved 
in political business, that endangers its independence."	
 The central bank began buying bonds again directly after a 
Governing Council meeting on Aug. 4, ECB President Jean-Claude 
Trichet said, with traders saying it had been in the market for 
Irish and Portuguese bonds.	
 However, as the purchases take 2-3 days to settle, those 
transactions, as well as those made at the start of last week 
show up in the data published this Monday.	
 Last week, the ECB said it would "actively implement" the 
bond-buying programme to fight the debt crisis, signalling it 
would buy Spanish and Italian government bonds to halt financial
market contagion.	
 French President Nicolas Sarkozy and German Chancellor 
Angela Merkel will discuss on Tuesday how to make the euro zone 
work more effectively amid persistent doubts in financial 
markets over Europe's ability to solve its debt crisis. 
 	
 	
 One of Germany's leading economic associations came out in 
favour of joint euro zone bond issuance on Monday, raising 
pressure on Merkel to consider bolder crisis steps ahead. 
 	
 The ECB also said no bonds held under the programme matured 
last week. Thus, when rounded to the nearest half billion, the 
overall value of the purchases -- albeit not marked to market --
rose to 96 billion euros ($135.2 billion). (For full details 
click )	
 The ECB and the 17 euro zone national central banks can buy 
government and corporate bonds from banks and other investors 
under the programme, but not directly from governments.	
 As usual, the ECB will take one-week deposits from 
commercial banks on Tuesday to neutralise the monetary impact of
the purchases and the inflationary pressure they create.	
 The ECB does not break down its bond purchases. However, 
bond market traders and analysts say, until last week, buying 
had been limited to Greek, Irish and Portuguese bonds and 
estimate that it holds around 45 billion euros of Greek debt.	
 For Reuters ECB information page on bond purchases, see 
 .	
 Date    Bonds bought  Bonds matured 	
14/05/2010      16.5    	
21/05/2010      10     
28/05/2010      8.5    
04/06/2010      5.5    
11/06/2010      6.5    
18/06/2010      4.2    
25/06/2010      4      
02/07/2010      4      
09/07/2010      1      
16/07/2010      0.302  
23/07/2010      0.176  
30/07/2010      0.081  
06/08/2010      0.009  
13/08/2010      0.01   
20/08/2010      0.338  
27/08/2010      0.142  
03/09/2010      0.173  
10/09/2010      0.237  
17/09/2010      0.323  
24/09/2010      0.134  
01/10/2010      1.384  
08/10/2010      0.009  
15/10/2010      0      
22/10/2010      0      
29/10/2010      0      
05/11/2010      0.771  
12/11/2010      1.073  
19/11/2010      0.713  
26/11/2010      1.348  
03/12/2010      1.965  
10/12/2010      2.667  
17/12/2010      0.603  
24/12/2010      1.121  
31/12/2010      0.164  
07/01/2011      0.113  
14/01/2011      2.313  
21/01/2011      0.146           0.087 	
28/01/2011      0 	
04/02/2011      0	
11/02/2011      0 
18/02/2011      0.711           0.040	
25/02/2011      0.369 
04/03/2011      0 
11/03/2011      0 
18/03/2011      0               0.170 
25/03/2011      0.432           1.054 
01/04/2011      0 
08/04/2011      0               0.055	
15/04/2011      0               0.830	
22/04/2011      0	
29/04/2011      0	
06/05/2011      0	
13/05/2011      0	
20/05/2011      0               1.227	
27/05/2011      0               	
03/06/2011      0	
10/06/2011      0	
17/06/2011      0               1.008	
24/06/2011      0	
01/07/2011      0	
08/07/2011      0 
15/07/2011      0 
22/07/2011      0               0.245 
29/07/2011      0 
05/08/2011      0 
 12/08/2011      22.0 	
	
 Total           96.0 
 (Reporting by Frankfurt newsroom; Editing by Catherine Evans) 
 
 ($1=.7099 Euro) 	
0 : 0
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