ECB dismisses reports on bond yield cap
21 Aug 2012
The European Central Bank, with support from Germany, sought to dismiss speculation that it was preparing to set caps on government bond yields in Spain, Italy and other debt-saddled euro-zone countries.
The move would likely quell suspicion that it was preparing to dramatically escalate its crisis response.
An article in Der Spiegel published this weekend stated that the ECB was considering setting interest rate thresholds for each country for the future purchase of government bonds.
Germany's central bank, the Bundesbank, voiced strong reservation to any bond purchases whatsoever by the ECB, baring a deep rift between the ECB and its largest member over how to best address high bond yields in crisis-hit countries.
Spain has been pushing the line that the ECB buy massive amounts of its bonds to cut borrowing costs.
The ECB in a comment that appeared to turn down Spain's plea said, as far as recent statements by government officials were concerned, it was also wrong to speculate on the shape of future ECB interventions. ECB representative added, monetary policy was independent and undertaken strictly within the ECB mandate.
The ECB began buying government bonds of Greece, Ireland and Portugal in May 2010 and expanded the programme to cover Spain and Italy last August, though officials have been pointing out that the programme was temporary and limited.
