The European Central Bank spent less on government bonds last week as yields fell in Italy and Spain.
The Frankfurt-based ECB said today it settled purchases worth €14.3 billion in the week through August 19th, down from the €22 billion it spent the previous week.
The ECB will take seven-day term deposits from banks tomorrow to absorb the €110.5 billion
of liquidity created since its bond program started on May 10th last year, a practice it employs to ensure the purchases don't fuel inflation.
The amount spent last week "is enough to show that the ECB is serious and they haven't just
been bluffing," said John Davies, a fixed-income strategist at WestLB AG in London. "At the same time, it's not so much that it suggests they are being pushed into a desperate situation."
The ECB was forced to start buying Italian and Spanish securities on August 8th after politicians failed to convince investors they could contain the debt crisis. Since then, yields on 10-year bonds in both countries have dropped from euro-era highs to below 5 per cent.
Bloomberg