Lagarde Does It Again: ECB’s QE Purchases Drop For 2nd Week Despite Bond Rout, Puzzling Markets
We can now confirm: The the ECB has indeed gone and done it once again.
One week ago we said that “the world’s most incompetent and confused central bank – which has a infuriating habit of saying one thing and doing the opposite – managed to shock markets once again, because after unleashing full-blown verbal diarrhea [two weeks ago] with one of its members even going so far as suggesting boosting QE to keep the yield surge in check, the ECB moments unveiled that last week, the pace of pandemic bond-buying last slowed to a two-month low even as officials warned that a global rise in yields could derail the economic recovery.”
Indeed, with markets looking to the ECB to boost its bond purchases in a week when global bond markets went haywire and yields across Europe soared, the ECB reported just €12BN in bond purchases, down sharply from €17.2BN the week prior and the lowest total amount purchased since the first week of January.
ECB defenders quickly stepped up, with many noting that the latest ECB data did not reflect orders made on Thursday and Friday of the previous week, as transactions take a couple of days to settle and show up in the ECB’s accounts “which may explain the unexpectedly big decline in purchases.”
As such, we said that “traders will need to wait until next Monday for next week’s data to see the full impact of purchases as the reports only encapsulate purchases up until the prior Wednesday.”
Well, “next Monday” just came and moments ago the ECB confirmed that indeed our initial take was correct: in the week ended March 5 – which also includes the critical last two days of the prior week when yields truly erupted – the ECB made the following purchases:
- Net ECB PEPP: +€11.898bln, which was DOWN from the previous week’s already disappointing €12.037BN
- This net was based on a gross €16.9BN offset by €4.9BN In redemptions.
As usual, the ECB needed some excuse and an ECB spokesperson said the weekly net figure was affected by “seasonality” because apparently the Frankfurt buying desk works poorly when it’s gray and rainy outside, and large redemptions.
Finally, one look at the chart below which shows a second consecutive week of declining bond purchases, paradoxically just as bond yields explode…
… is why the ECB spokesperson said that the “increase is temporarily delayed.”
Maybe next week we will finally see a rebound. Until then, however, all we have is increasingly louder trader groans, disappointment and rising snark.
— Viraj Patel (@VPatelFX) March 8, 2021
Mon, 03/08/2021 – 10:12