ECB won’t reveal size of bond buying – source

May 11 (BestGrowthStock) – The European Central Bank does not
intend to reveal how much is being spent on its unprecedented
bond-buying program because that information could assist
speculators, a European monetary source said on Tuesday.

National central banks in the euro zone started buying
government bonds at the behest of the ECB on Monday as a key
part of efforts to prevent the debt problems of weak states
from destabilising financial markets.

Details of the bond purchases remain vague, with no hint of
how much central banks will buy. The monetary source, speaking
on condition of anonymity, said this was intentional, since
even publishing purchase totals might give fodder to
speculators.

“It is not something that has a precommitted volume. It is
used with a goal of stabilising markets and therefore it makes
no sense to discuss specific numbers,” the source said.

“We should avoid any information which could be used for
speculative attacks.”

The source said the ECB would target problem areas in the
bond market, implying it would stick to bonds where yields
spiked, a problem suffered by Greek, Portuguese, Spanish, Irish
and Italian debt in recent weeks.

“The intention is to get again control of the unorderly
markets and I think this is a goal that has been achieved
remarkably in an effective way, so I think it makes sense to
stay on the way we have started,” the source said.

STERILISATION

The ECB has said the bond purchases will not fuel inflation
or add to the amount of money circulating in the economy
because they will be offset by liquidity-absorbing measures.

But the monetary source said policymakers were still
discussing the scope of these offsetting moves — leaving open
the option that not all the bond purchases would be completely
sterilised.

ECB President Jean-Claude Trichet has said term deposits
might be used in sterilisation efforts, and the monetary source
noted the U.S. Federal Reserve had set an example by issuing
bonds.

The source said he could not talk about whether the
purchases would be 100 percent sterilised or go into technical
details, but said the bigger the purchases were, the more need
for sterilisation.

“If volumes are larger, sterilisation becomes more
pressing.”

GROWTH

The source also said that while some countries would suffer
under the pain of budget cuts, the euro zone as a whole would
not be affected by fiscal belt-tightening.

Instead, the ECB could well revise up its forecasts for
economic growth in the 16-nation region on the back of a
brighter global outlook, the source said.

“For the time being I would think that we will rather have
an upward revision because what we see is that world trade and
therefore exports show a pretty strong development,” he said.

“If you look at the strong economies like Germany, like
France, or Austria, we see that … export performance is
better than expected and therefore labour markets are better
than expected. So while it’s early to say, I could imagine that
we will also have upward revisions for the euro zone in its
totality.”

The source said there was no reason for the ECB to change
its assessment of balanced inflation risks, despite pressures
from rising commodity prices, and gave no hint that the ECB
might raise rates from the current 1 percent any time soon.

“Inflationary expectations are very balanced, and I don’t
see a major reason how this could change.”

Stock Market Research
(Editing by James Dalgleish)

ECB won’t reveal size of bond buying – source