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Is the ECB bazooka a dud? The bank's bond purchases will be unlimited, but sterilized, with the...

Is the ECB bazooka a dud? The bank's bond purchases will be unlimited, but sterilized, with the Orwellian name "Monetary Outright Transactions" given to the program, reports Bloomberg. "Sterilization" suggests any securities purchased are offset with the sale of other securities, meaning no net change in the central bank balance sheet, i.e., no QE.
Comments (18)
  • untrusting investor
    , contributor
    Comments (9973) | Send Message
     
    Hmmmm ... what other securities does the ECB have other than bonds of the weaker EU countries which they could possibly sell?
    5 Sep 2012, 10:19 AM Reply Like
  • lenniefalcon
    , contributor
    Comments (34) | Send Message
     
    Only two countries support the underpinnings of the Euro, Switzerland and the United States (primarily overnight). The ECB is an exercise of borrowing from Peter to pay Paul. Draghi's crap is an exercise in obfuscation.
    5 Sep 2012, 11:14 AM Reply Like
  • Lakeaffect
    , contributor
    Comments (1160) | Send Message
     
    Perhaps ECB Bonds?

     

    Coming soon at a theatre near you!
    5 Sep 2012, 01:48 PM Reply Like
  • credit_man
    , contributor
    Comments (175) | Send Message
     
    they dont need to sell bonds they will withdraw liquidity created by their purchases.exactly what they have done so far.nothing new here.
    what is new is "unlimited"
    5 Sep 2012, 04:22 PM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    Repurchase agreements.
    5 Sep 2012, 06:05 PM Reply Like
  • anomaly1
    , contributor
    Comments (915) | Send Message
     
    All I can say is... sell and short. ECB is the junk bond lender of Europe.
    5 Sep 2012, 11:35 AM Reply Like
  • ssl23
    , contributor
    Comments (120) | Send Message
     
    the 'details" of the bond buying plan seem more and more obscure.....
    no public target levels?"unlimited "buying but that could also mean "fixed" buying and even "selling" if the country's back off on conditionality...that may even force some countries out of the euro!

     

    Seems like the new plan of CB are to be less transparent in policy and more apparent in manipulating markets on short term basis and mis-pricing risk assets. The "conditionality" is the detail we need to properly analyze whether this plan will work....
    5 Sep 2012, 12:30 PM Reply Like
  • credit_man
    , contributor
    Comments (175) | Send Message
     
    public target is like giving your own gun to the sniper hunting you......
    they know what they have to do(ECB traders) better than you think ..
    dont mix them with decision takers........(better known as politicians..)
    5 Sep 2012, 04:24 PM Reply Like
  • credit_man
    , contributor
    Comments (175) | Send Message
     
    All the gov bond purchases so far have been sterilized so far by ECB through interbank liquidity withdrawal.so this should not come as a surprise.ECB dosnt want to be confronted with the unwinding risk of QE methodology(the one FED will face one day.selling bonds and withdraw interbank liquidity).
    so bank liquidity wont be helped but after all that have had LTRO to help them.this time what ECB wants is to help sovereign refinancing...without saying it too loudly(hence the below 3yr constraint)
    5 Sep 2012, 04:19 PM Reply Like
  • jhooper
    , contributor
    Comments (6166) | Send Message
     
    Are you saying the ECB balance sheet will not grow?
    5 Sep 2012, 04:36 PM Reply Like
  • schatzl
    , contributor
    Comments (391) | Send Message
     
    Which is a clear contradiction of its mandate. It's crazy how non-elected (ex GS VP no less) have taken over running Europe without any democratically elected mandate whatsoever. Why do I still go and vote? Seems entirely unnecessary.
    5 Sep 2012, 04:38 PM Reply Like
  • credit_man
    , contributor
    Comments (175) | Send Message
     
    ECB balance sheet will grow but eurozone money supply won't
    (inflation fear)
    5 Sep 2012, 04:50 PM Reply Like
  • credit_man
    , contributor
    Comments (175) | Send Message
     
    you dont vote only for a monetary policy in my opinion
    it was clear since euro arrival that monetary policy was transfered as a sovereign right.
    5 Sep 2012, 04:54 PM Reply Like
  • jhooper
    , contributor
    Comments (6166) | Send Message
     
    The money supply bit is sort of a semantical argument. What really matters is if the balance sheet grows. Now, we need to know by how much. "Unlimited" is tough to plan for. Does it mean a trillion, two trillion, or what?

     

    I liked it when BB at the Fed would tell me volumes and dates. That made it much easier to take advantage of the stimulus bubbles he created. Draghi is leaving me guessing.
    5 Sep 2012, 05:07 PM Reply Like
  • credit_man
    , contributor
    Comments (175) | Send Message
     
    Disagree

     

    Money supply is important too as it affects bank liquidity.
    real QE has a double effect in helping asset prices to stabilize(here gov bonds) AND liquidity to increase at the expense of theoritical increased inflation risk .not the case with sterilized purchase.
    6 Sep 2012, 01:13 AM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    A Twist by another flavor.
    5 Sep 2012, 04:44 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    I would add that there will be arbitrage trades from this action, and that will distort to an extent the intended outcome sought by the ECB. "Unlimited" is unlikely and unrealistic, and probably meant as a rhetorical statement reinforcing the ECB's "power."

     

    If the ECB sells German Bunds to buy Spanish and Italian debt, it is an outright transfer of wealth. But we knew that, right?
    5 Sep 2012, 05:04 PM Reply Like
  • ssl23
    , contributor
    Comments (120) | Send Message
     
    transfer of wealth...from Germany to Spain? Isnt the US Fed doing the same thing here from savers to debtors with QE and twist?

     

    If this is all they have, then its sell the news time....
    This is just a LTRO in disguise, the ECB has decided to lend its balance sheet to finance govts. on a short-term basis.

     

    The "unlimited" and "not making levels public" is intended to keep the shorts from testing the ECB...they're talking about not reallly needing to buy that much bonds at the same time this "unlimited" comes out....

     

    This sounds like a Goldman Sachs structured product...
    Remember who helped Greece hide they're true balance sheet
    via off balance sheet trades and sold to Greece sophisticated interest rate products to help them finance their debt???
    5 Sep 2012, 08:50 PM Reply Like
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