Thursday, September 6, 2012

Technical Note: The ECB Bond Buying Program is a Joke

From an ECB technical note.
Sterilisation: The liquidity created through Outright Monetary Transactions will be fully sterilised.
Bottom line: For every sovereign debt piece bought by the ECB in operation MOT, the ECB will sell an equal euro amount of other securities. This means MOT will not increase the euro money supply, but merely creat support for dead beat EZ government debt, while draining funds from other sectors.


  1. Are they focusing upon any particular maturities?

  2. There is NO such thing as "Sterilization". Really, this BS is nothing more than the SMP which was shit-canned and put on the doesn't work shelf 6 months ago.

  3. oh hello, bailout. we meet again.

  4. Mr Fetz, They said no specific amounts, no public yield targets or spread bands. Maturities in 1-3 year.

    Wenzel, How can you actually tell if they are sterilizing or just saying they are???

  5. @ Matt,

    Just look at their balance sheet. This would be quite obvious soon if they do not sterilize.

    That's all show, all big empty jawboning to steer expectations. And they will keep doing playing with expectations as long as it works. Why actually do something if only speaking about it is enough (at the moment). Give the market 3 new letters like "MOT" and you have won a little more time to kick the can...