Bill Mitchell-en ECB continues to play a political role making a mockery of its ‘independence’
(i) Sarrera gisa
(iii) Hasiera-hasieratik dagoena: EBZ-ren ahalmena eta jokaerak (kasu, Grezian 2016an)
(iv) Banku zentralak eta bono produktuak
(v) Banku zentralen independentziaz
(vi) Tituluen merkatu programa
The following graph shows the 10-year government bond spreads against the German bund for France, Spain and Italy between January 2008 and June 29, 2012 (daily data).
The next graph shows the weekly purchases under the SMP for the program. There were two main purchasing periods: May 2010 and then again in August 2011 into 2012. Between March 25, 2011 and August 8, 2011 there was no SMP purchases by the ECB.
On February 21, 2013, the ECB finally released data for “the Eurosystem’s holdings of securities acquired under the Securities Markets Programme (SMP)” (Source):
The following graph shows the total purchases of government bonds by the Member State (blue bars) and the proportion of contribution to the ECB’s Paid-up Capital by the respective Member States (red triangles).
The other point to note is that if the ECB had have ran its SMP without the austerity conditionality being attached then the Eurozone would have recovered from the GFC fairly quickly and the spreads would have fallen anyway.
The so-called public debt crisis that overtook the Eurozone was entirely the fault of the policy makers who insisted on austerity at the expense of growth.
(vii) Euroguneko bono merkatua
I provided this graph to allow you to see the most recent events in context.
The next graph shows the spreads since February 26, 2018 to June 8, 2018. The Italian national election was held on March 4, 2018, at the end of the first trading week shown in this graph.
There was some spillover to Spanish spreads but that may have been to do with the political uncertainty in that nation. French spreads did budge.
(viii) EBZ-ren rola Italiako hauteskunde-prozesuan
Clearly the May figures showed a rather bizarre increase in the share of purchases for German public debt and falls for Spain, Italy and France
The next graph shows the absolute change (EUR millions) between April and May 2018 for all the Eurozone Member States that participate in the PSPP.
The following graphic is the latest Capital Key data (for the 19 Member States).
(x) Grezia kanpo uzten bada, irudia
But with Greece barred from the PSPP the adjusted capital key implies higher proportions which are captured in the following table. I also included the April and May 2018 purchases under the PSPP. The implied PSPP purchases column under the APP rules is calculated assuming that 90 per cent of the APP purchases of €30 billion will be government bonds.
However, the complexity is that 10 per cent of those purchases can be from so-called supranational institutions, which means that on average around €24.3 billion worth of bonds from the Member States would comprise the target. The total purchases are then allocated by Member State according to the adjusted capital key.
It has been obvious since the inception of the PSPP that the ECB hasn’t followed the ‘capital key’ guideline very closely at all in allocating its monthly purchases.
The ECB provides a time series of the – Cumulative purchase breakdowns under the PSP.
If we take Greece out of the Capital Key and recalculate proportions, we can calculate the deviation in PSPP purchases from the adjusted Capital Keys over the course of the PSPP.
The following graph shows the deviation (in percentage points – that is comparing the monthly proportion of total purchases against the proportion of paid-up capital) since the inception of the PSPP for Germany, France, Italy and Spain.
So any claim that the May dynamics were in some way driven by a need to maintain proportionately with respect to the capital key is ludicrous.
If we base the deviation on the existing capital key which includes Greece then the following graph would be appropriate.
Either way, there is little correspondence between the monthly purchases and the strict paid-up capital proportions.
The following graph shows the growing redemptions as the earlier PSPP purchases start to mature and are replaced. The blue bars are actual redemptions and the green bars are estimated redemptions in the coming months.
The point to note is that in April 2018, there was a large volume of bonds held as the ECB’s PSPP portfolio that needed to be turned over. A high proportion of those redemptions were German bunds.
Which is consistent with the ECB’s statement and goes some of the way to dismissing the May result as a “technical” matter.
The following graph shows the deviation of the monthly PSPP purchases (€ millions) from the 90 per cent target of total APP purchases adjusted for the changing total APP target.
(xiii) EBZ: galdera eta Mitchell-en jarrera
(1) In short, the recent suspicion that the ECB has allowed Italian spreads to widen in recent weeks to undermine the proposed new coalition government does not appear to be implausible.
(2) The ECB can argue a ‘technical’ case for the May PSPP dynamics, and there is some truth in that, given the lumpy redemptions.
But the ECB has also demonstrated over the life of the PSPP to date that its ‘guidelines’ are rather flexibly interpreted and it is clear that there was considerable scope, notwithstanding the technical issues, for the ECB to quell the growing uncertainty in the Italian bond markets.
(3) One would conjecture with a high degree of certainty that if the Italian government was [were] firmly pro-Brussels and it encountered the level of uncertainty in the bond markets that we have witnessed in May 2018, the ECB would have quickly moved to reduce the spreads against the German bund.
(4) While the ECB claims it operates transparently, at the very least, it should be forced to release internal communications, particularly memos from management to the system operators, outlining any instructions that were given to guide the monthly PSPP purchases for May and to detail when the proportions with respect to the ‘capital key’ are to be violated.
Ellis Winningham — The Bond Market Doesn’t Control Anything; the Currency-Issuing National Government Does
Bill Mitchell-en azken lan interesgarri batzuk
B. Mitchell-en bi ohar: EBZ-z eta bankugintzaz
Defiziten afera gobernuak moneta jaulkitzaileak direnean