ECB fails to fully off­set govt bond buys

The Pak Banker - - Company& -

LONDON: The Euro­pean Cen­tral Bank failed to at­tract the 73.5 bil­lion eu­ros ($97.4 bil­lion) from banks on Tues­day needed to off­set its seven-month run of euro zone govern­ment bond pur­chases, in­stead man­ag­ing to draw just over 60 bil­lion.

The pace of the Euro­pean Cen­tral Bank's govern­ment bond pur­chases picked up last week as the bank spent 1.121 bil­lion eu­ros, re­flect­ing its con­tin­u­ing ef­forts to calm euro zone debt mar­kets.

The cen­tral bank takes seven-day de­posits from com­mer­cial banks on a weekly ba­sis to off­set its spend­ing, but the fail­ure to fully ster­ilise the pur­chases is likely to re­flect the fact banks are keep­ing hold of their fund­ing around the tra­di­tion­ally tense year-end pe­riod.

The Euro­pean Cen­tral Bank paid a weighted av­er­age in­ter­est rate of 0.66 per­cent on funds de­posited by banks, com­pared with 0.42 per­cent last week.

A to­tal of 41 banks of­fered up funds. ( Click for full de­tails.) Last week 44 banks of­fered up 81.024 bil­lion eu­ros as the Euro­pean Cen­tral Bank sought to drain 72.5 bil­lion eu­ros.

The Euro­pean Cen­tral Bank can buy govern­ment and cor­po­rate bonds un­der its pur­chase pro­gramme but has not re­vealed how much it can spend or for how long it in­tends to buy them.

Last week's 1.121 bil­lion eu­ros worth of pur­chases was dou­ble the amount spent by the bank the pre­vi­ous week but still just a frac­tion of lev­els reached shortly af­ter the pro­gramme was in­tro­duced in May.

An­a­lysts be­lieve the bank is con­cen­trat­ing its pur­chases al­most ex­clu­sively on the govern­ment debt of euro zone trou­blespots Greece, Ire­land and Por­tu­gal. -PB News

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