ECB winds down bond buys as governments seek crisis solution

The European Central Bank bought marginally less in sovereign bonds last week than the week before, scaling back its intervention as eurozone governments seek to prevent an uncontrolled Greek default. ECB figures published on Monday showed the bank bought 2.243 billion euros worth of bonds between October 6 and 12, down from 2.312 billion the previous week and taking the programme's overall total to 165 billion euros.
"Purchases of sovereign debt by the eurosystem (of eurozone central banks) have remained extremely limited and will stay so," said Bank of France Governor Christian Noyer, who sits on the ECB's policymaking Governing Council. No previously purchased bonds matured last week and as usual the ECB said it would hold a 'sterilisation' operation on Tuesday where it takes one-week deposits from banks to neutralise the inflation pressure the bond purchases create.
Europe is under pressure from its G20 peers to take swift, decisive action to stop the Greek debt crisis engulfing bigger eurozone states and hurting the already weak global recovery. Italy and Spain have been seriously affected and seen their borrowing costs rise strongly over the last two months. Last month, Italy paid the highest yield on a 10-year bond since the introduction of the euro, highlighting the troubles. Italy's five-year debt costs fell at an auction last Thursday, helped by expectations politicians will use more firepower to curb the sovereign debt crisis.
Traders also said the ECB bought Italian paper late last week, but those purchases have not shown up in the data yet. Purchases take two to three days to settle, meaning that when the ECB is buying, the weekly figures do not necessarily give the full picture. The ECB reactivated its government bond buying programme - known as the Securities Markets Programme - in August to keep those costs in check, and to ensure its low interest rates are felt in even troubled parts of the eurozone.