The ECB's new program to buy Spanish sovereign bonds -therein supporting the price and driving down the interest rate- is called Outright Monetary Transactions (OMT). I thought this title had all the charm and descriptiveness of Quantitative Easing --which is to say none. The program name and acronym -OMT- falls short of its full potential because it does not account for 2 key descriptors:
- Voluntary. Spain doesn't have a gun to the ECB's head. Clearly the ECB is volunteering to help Spain -and anyone else that may ask- to buy their toxic bonds.
- Intrusive. This ECB program is yet another attempt to deny reality from unfolding by wading into bond markets and crushing all those that would attempt to assign a price to toxic bonds that will default.
So I am giving OMT a more appropriate name and acronym: VOMIT.
The ECB's VOMIT is on the verge of being launched.
We'll probably see some VOMIT next week.
I'm nervous about all this VOMIT. If it does not work, the bond market and stock market will throw up.