ECB BUYING UP IRISH GOVERNMENT ISSUED BONDS : ECB Buys Irish Debt as Bonds Slide a Seventh Day, Traders Say – Bloomberg
The European Central Bank bought Irish government bonds today, according to two traders with knowledge of the transactions.
The ECB purchased short-dated maturities, said the traders, who asked for anonymity because the deals are confidential. A central bank spokesman declined to comment when contacted by telephone in Frankfurt.
Irish 10-year bonds slid for a seventh day, driving the extra yield investors demand to hold the debt instead of German bunds to a record. The cost of insuring the country’s sovereign debt also rose to an all-time high as credit-default swaps on Allied Irish Banks Plc subordinated debt signaled a 63 percent probability of default within five years.
The difference in yield, or spread, between the Irish securities and benchmark bunds widened 23 basis points to 506 basis points. Ireland’s government will decide the size of the 2011 budget cuts and tax-raising measures at a meeting later today. The figure will be published by Nov. 5.
The ECB’s bond buying program differs from so-called quantitative easing policies pursued by the Federal Reserve and 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 stabilize 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.