Tuesday, 4 September 2012

Europe Central Bank - Short Term Bond Purchase Incoming

Continuing the US trend of Quantitative Easing, comes some rumors and leaks of ECB's Chief Mario Draghi suggesting purchasing of short term bonds...

The president of the European Central Bank dropped more hints about how the bank could support struggling countries, suggesting the bank was free to buy government bonds maturing in three years or less.
The comments by Mario Draghi in a closed hearing at the European Parliament on Monday came ahead of the ECB's monthly policy meeting Thursday. 
Mr. Draghi indicated on Monday that the ECB would be open to buying bonds with a maturity of two to three years, stressing that such purchases wouldn't break European Union treaties, according to several lawmakers present at the hearing.
Mr. Draghi "has no problem with purchases on the secondary market for bonds of two to three years," European lawmaker Jean-Paul Gauz├Ęs said after the hearing. "He said the ECB wouldn't be contravening the treaty in doing so."
 EU treaties don't allow the ECB to finance governments, on the basis that such funding could spark inflation. That prohibition has constrained the ECB while its U.K. and U.S. counterparts have spent hundreds of billions of dollars and pounds buying up their own governments' bonds in recent years.

If this comes to fruition along with QE3...expect some big stock gains in the market (based on QE1/2/Operation Twist results).

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