ECB Settled Record 22 Billion Euros in Bonds

The European Central Bank spent a record amount on government bonds last week as it began buying Italian and Spanish securities to contain the debt crisis.

The Frankfurt-based ECB said today it settled purchases worth 22 billion euros ($31.7 billion) in the week through Aug. 12, more than the 15 billion-euro median estimate in a Bloomberg News survey of 19 economists and strategists. That also surpasses the 16.5 billion euros the ECB spent during the first week of its initial foray into Greek markets in May last year.

“The market optimists will interpret this number as good news as it underscores the ECB’s resolve,” said Christoph Rieger, head of fixed-income strategy at Commerzbank AG in Frankfurt. “Equally, the pessimists will point out that it is bad news as it shows how much money the ECB had to commit for the yield compression seen.”

The ECB was forced to start buying Italian and Spanish bonds on Aug. 8 after politicians failed to convince investors they could contain the debt crisis. Ten-year yields in both countries, which had soared to euro-era highs, last week dropped by more than 100 basis points to about 5 percent.

The ECB will take seven-day term deposits from banks tomorrow to absorb the 96 billion euros of liquidity created since its bond program started on May 10 last year, a practice it employs to ensure the purchases don’t fuel inflation.

     Week      Purchases Settled (bln)  Total (bln)
     1              16.50*              16.5
     2              10.00*              26.5
     3               8.50*              35.0
     4               5.50*              40.5
     5               6.50*              47.0
     6               4.00*              51.0
     7               4.00*              55.0
     8               4.00*              59.0
     9               1.00*              60.0
     10              0.302              60.0
     11              0.176              60.5
     12              0.081              60.5
     13              0.009              60.5
     14              0.010              60.5
     15              0.338              60.5
     16              0.142              61.0
     17              0.173              61.0
     18              0.237              61.0
     19              0.323              61.5
     20              0.134              61.5
     21              1.384              63.5
     22              0.009              63.5
     23                  0              63.5
     24                  0              63.5
     25                  0              63.5
     26              0.711              64.0
     27              1.070              65.0
     28              0.713              66.0
     29              1.348              67.0
     30              1.965              69.0
     31              2.667              72.0
     32              0.603              72.5
     33              1.121              73.5
     34              0.164              73.5
     35              0.113              74.0
     36              2.313              76.5
     37              0.146              76.5
     38                  0              76.5
     39                  0              76.5
     40                  0              76.5
     41              0.711              77.0
     42              0.369              77.5
     43                  0              77.5
     44                  0              77.5
     45                  0              77.5
     46              0.432              76.5
     47                  0              77.0
     48                  0              77.0
     49                  0              76.0
     50                  0              76.0
     51                  0              76.0
     52                  0              76.0
     53                  0              76.0
     54                  0              75.0
     55                  0              75.0
     56                  0              75.0
     57                  0              75.0
     58                  0              74.0
     59                  0              74.0
     60                  0              74.0
     61                  0              74.0
     62                  0              74.0
     63                  0              74.0
     64                  0              74.0
     65                  0              74.0
     66              22.00              96.0

*calculated by Bloomberg News

To contact the reporter on this story: Jeffrey Black in Frankfurt at jblack25@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net.

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