Bonds News

Trichet says ECB didn't discuss govt bond buys

LISBON, May 6 (Reuters) - European Central Bank President Jean-Claude Trichet said on Thursday the bank did not discuss the option of buying euro zone government bonds during its meeting on Thursday.

He had said on Sunday that the ECB had not made a decision to buy bonds “at this stage”, a similar form of words to that he used earlier in the year about changes to the collateral framework.

This, coupled with rising yields for many euro zone government bonds in the wake of Greece’s debt woes, prompted economists to speculate the ECB might abandon its opposition to buying government bonds.

Trichet said on Thursday that a decision to exempt Greece from a minimum rating on assets acceptable as collateral for ECB funds took into account the country’s very ambitious austerity programme.

European laws prevent the ECB from buying debt directly from governments in the way the United States and Britain’s central banks have done during the financial crisis. However, it can get round this restriction by buying debt second-hand from banks.

The Greek debt crisis has driven the cost of its sovereign debt and its insurance to record levels. The problems have also started to push up the cost of other euro zone members with strained public finances such as Portugal, Spain and Ireland. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a graphic package including graphs on bond spreads, debt ratings and deficit levels, please click on: ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Reporting by Axel Brugge; writing by Marc Jones; editing by John Stonestreet