FRANKFURT: The European Central Bank kept its government bond-buy programme in hibernation for a 17th week running last week, holding fire while euro zone leaders worked out a package aimed at resolving the bloc's debt crisis.
Comments from policymakers have made it clear the programme has effectively been shut down, despite the debt crisis showing signs of infecting Italy and Spain.
The package euro zone leaders agreed last week will keep the ECB out of bond markets.
Government leaders agreed last Thursday on a second rescue package for Greece in a deal which includes the right for the European Financial Stability Facility (EFSF) to buy bonds on the secondary market at the ECB's recommendation.
However, the EFSF's ability to buy bonds is limited by its 440 billion euro capacity, which means the ECB may want to keep its bond-buying programme on the backburner instead of officially shutting it down. The ECB has not announced any limits to its programme, and can also act quickly.
The central bank also said 245 million euros of bonds held under the programme matured last week. However, when rounded to the nearest half billion, the overall value of the purchases albeit not marked to market remained at 74 billion euros.
The ECB started its bond purchases May last year as part of euro zone efforts to stave off the debt crisis.
It and the 17 euro zone national central banks can buy government and corporate bonds from banks and other investors under the programme, but not directly from governments.
The ECB does not break down its bond purchases. However, bond market traders and analysts say buying has been limited to Greek, Irish and Portuguese bonds and estimate that it holds around 45 billion euros of Greek debt.
As usual, the ECB will take one-week deposits from commercial banks on Tuesday to neutralise the monetary impact of the purchases and the inflationary pressure they create.
Copyright Reuters, 2011
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