<B>Trichet Draws ECB âBazookaâ to Stem Contagion</B> European Central Bank President Jean- Claude Trichet signaled heâs ready to start buying Italian and Spanish bonds in his riskiest attempt yet to tame the sovereign debt crisis. In a statement issued in the name of the ECB president after an emergency Governing Council conference call last night, the Frankfurt-based central bank welcomed the two nationsâ efforts to reduce their budget deficits and said it will âactively implementâ its bond-purchase program. It also called on all euro-area governments to follow through on the steps they agreed to July 21, including allowing the European Financial Stability Facility to purchase bonds on the secondary market. With governments failing to act swiftly enough to stop contagion, it has fallen to the ECB to battle a crisis thatâs threatening the survival of the euro. Buying Italian and Spanish debt may require the ECB to massively expand its balance sheet and open it to accusations of bailing out profligate nations, breaching a key principle in the euro zoneâs founding treaty. Germanyâs Bundesbank opposes the move. âThe ECB is once again intervening as the last line of defense,â said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. âThe intervention will put a halt to the bond-market crash that some member states faced. It will in our view bring an immediate tightening in Spanish and Italian bond spreads of the order of 100 to 150 basis points.â cont... http://www.bloomberg.com/news/2011-08-07/trichet-draws-ecb-bazooka-to-stem-contagion.html
It's like everyone has given up out running the grizzly, and is just focused on outrunning their fellow campers.
Short lived sell on the bund, cash from ecb has to go somewhere and you can just about get a real yield in bund this morning, real money piling back in.