Europe trades sharply lower Monday - Marketwatch
Picking a fight with Bundesbank dangerous for ECB - Commentary
Financial Times
The decision by the European Central Bank to intervene in the bond markets to buy Italian and Spanish government debt is likely to prove hugely controversial – both inside and outside the eurozone’s chief monetary guardian.
It was not clear on Sunday night whether the ECB governing council was still split on the issue, after the German Bundesbank had argued strongly last week against taking such an intitiative. But there remains a clear division of principle between members of the ruling body. Opponents of such bond buying, led by Germany’s Bundesbank, have constantly argued that such measures go beyond the monetary policy responsibilities of the ECB, and should be left to the governments of the 17 eurozone member states.
Both Italian and Spanish bond markets are far larger than those of the three small peripheral eurozone states, and the central bank would have to be ready to commit far more resources to the exercise, carried out on its behalf by national central banks. But the division of opinion in the governing council, that has pitted both German and Dutch central banks against their eurozone colleagues, is more a matter of principle than of cash.
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WSJ
LONDON—The European Central Bank bought Italian and Spanish government bonds for the first time Monday as it moved to contain the euro-zone sovereign-debt crisis.
Traders with knowledge of the purchases said the ECB was buying Italian bonds in €50 million clips, while the purchases of Spanish bonds were executed in slightly smaller sizes.
The ECB said late Sunday it would "actively implement" its bond-buying program, which it resumed last week with purchases of Irish and Portuguese bonds.
Italian and Spanish bonds had already rallied hard in anticipation of the ECB entering the market.
By late morning in Europe, Italian two-year bond yields were 1.05 percentage points tighter versus similar-dated German bonds at 3.50%, fractionally off their tightest levels of the morning, according to Tradeweb.
"People who had bad long positions may use the recovery today as an opportunity to get out of those trades," one trader said. "In terms of positioning, the market had been short in Italy and Spain, which is why we're seeing such wild moves."
Spanish two-year yields were 1.09 percentage points tighter versus Germany at 3.15%.