ECB puts bond purchase on hold

The European Central Bank has again opted not to resume its programme of buying up bonds of eurozone nations, data suggested on Monday, even though its chief hinted last week the bank may do so. According to data published on the bank’s website, it did not buy any sovereign bonds last week for the 21st week in a row. The ECB launched its bond-buying blitz under the Securities Market Programme (SMP) in 2010 to help debt-wracked eurozone countries that were finding it difficult to drum up financing in capital markets. But the SMP has lain dormant since February following the ECB’s moves to pump more than one trillion euros ($1.23 trillion) into the banking system via three-year funding operations in December and February. After one of the most hotly anticipated ECB policy meetings in recent history, Draghi last on Thursday said the central bank “may” resume bond purchases, but it was primarily up to governments to solve the long-running debt crisis. ECB executive board member Benoit Coeure said the same in an interview published in the Slovakian newspaper Hospodarske Noviny on Monday. “Within its mandate to maintain price stability, and in strict independence, the ECB may then undertake sovereign bond purchases,” Coeure said. SMP was controversial from the start, with critics saying the ECB was overstepping its mandate in buying up sovereign bonds on the secondary market. Between January and August 2011, the purchases dried up, but the ECB resumed the programme when renewed strains pushed Italian and Spanish borrowing rates to unsustainable levels. The ECB has so far accumulated 211.5 billion euros in bonds from Greece Ireland, Portugal, Italy and Spain as part of the programme. At one point, purchases reached as much as 22 billion euros in a single week. European stock markets rose steadily on Monday after spiking sharply ahead of the weekend on better-than-expected US jobs data and some belated optimism over the eurozone debt crisis, traders said. From:Gulftoday