The European Central Bank...

is out of control re: bond (EZ) buying

from FT 8th September 2010

By David Oakley and Jennifer Hughes in London and Kerin Hope in Athens

Published: September 8 2010 19:30 | Last updated: September 8 2010 19:30

"The European Central Bank has stepped in to shore up the eurozone government bond markets in what appears to be its biggest such intervention since early July. The ECB has bought between €100m and €300m of Greek, Irish and Portuguese bonds so far this week, traders said on Wednesday, as worries over the health of some highly indebted eurozone economies resurfaced.

Yields on Greek bonds rose to levels last seen before the €750bn emergency rescue package was launched to avert the collapse of the eurozone bond markets in May.

Although the amount of bonds bought by the ECB this week has been small, some strategists said the purchases were a sign that the European sovereign debt crisis was not over.

The ECB has bought €61bn in government bonds – mostly of the weaker eurozone economies of Greece, Ireland and Portugal – since it launched its intervention programme on May 10 as part of the multibillion-euro international bailout.

It bought €16.5bn in bonds in the first week of the programme but has since scaled back its buying. In recent weeks, as the eurozone crisis appears to have eased, it has bought only very small amounts of government debt.

The so-called peripheral bond markets of Greece, Ireland and Portugal have come under pressure as doubts over their economies and banks have deepened.

Greek yields for two-year bonds jumped nearly a quarter of a point on Wednesday to 10.33 per cent, while Irish yields edged slightly higher to 3.21 per cent. Portuguese two-year yields were flat at 3.28 per cent.

Portuguese auctions of three-year and 11-year bonds were well subscribed, although traders said the government had to pay high yields to attract investors.

Market confidence in Greece was hit by numbers showing that the country sank deeper into recession in the second quarter and fears that street protests were about to resume.

Domenico Crapanzano, head of euro rates sales and trading at Jefferies, said: “Hopes that the eurozone debt crisis had seen the worst are premature. It is far from over.”

Gonna end in tears...when austerity (PIIGS) flops. Can just sense those writedowns on sovereign held debt. I don't even think the ECB printing press will be able to plug that hole.

The IMF: what a bunch of butnuts

refer (from the Independent 2nd September 2010)

"However, the IMF also said it was unlikely that even Greece and other highly-indebted states would renege on their debts as they struggled to tame their deficits. "In our view, the risk of debt restructuring is currently significantly overestimated," the fund said. "Although it is generally wise to assume that market developments reflect economic fundamentals, market overreaction does occur from time to time, with adverse implications for countries' borrowing costs and debt dynamics."

It's going to be awesome when the IMF will have to eventually bailout the European Central Bank.

ECB unrealized losses must be off the scale around about now... what with the HUGE bailouts of Spain/Ireland banks.

Last gasp sentiment/rhetoric intervention, particularly to keep the EUR bid

Asia is overpricing risk (update 4) - short convering

Short covering on no real news or events just a panic buy on wafer thin volumes. Some 'strange' bids on the USD/YEN (there you go conspiracy theorists!); which is convert Japan Goverment FX intervention (not official)

This may have sent index's higher also with commodity prices coming in firmer. But as usual Asia have overpriced risk trades again on thin volume (please refer to Shanghai Composite inverse market trend to the Dow, S&P 500 ).

If you are running with this all the power, but it's frenetic 'dumb' buying on low liquidity; so it will be gap sell down and hard. Fuck'em

Some dreadful EU bank news should come to the party as the ECB winds back it's Euro zone bond buying and a spectra of a hung Parliament in Australia after the 21st August 2010 election.

...sell signals will light up.