Buba a Critic of ECB Bond Program

Germany’s Bundesbank stepped up its criticism of the European Central Bank’s plan to embark on potentially “unlimited” government bond purchases, widening a rift over how to tackle the sovereign debt crisis.

“The Bundesbank holds to the opinion that government bond purchases by the Eurosystem are to be seen critically and entail significant stability risks,” the Frankfurt-based central bank said in its monthly report today. The new program “could be unlimited” and decisions about potentially far greater sharing of solvency risks should be taken by governments or parliaments, not by central banks, it said.

The comments suggest Bundesbank President Jens Weidmann won’t support a measure the ECB is rushing to design to help reduce governments’ borrowing costs and win them time to implement fiscal reforms. Spanish and Italian 10-year bond yields slid to the lowest in more than six weeks today after German news magazine Der Spiegel reported the ECB’s new program may set yield caps. In response, the ECB issued a statement saying it’s “misleading to report on decisions which have not yet been taken.”

Bloomberg

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell