Europe Confirms Increased Sovereign Bond Purchases Last Week

The ECB confirmed market talk that it had stepped up if sovereign bond purchases last week as the debt strains reached crisis levels. The European central banks bought 1.074 bln euros vs 711 mln the prior week. This is the most in several months. It is not technically QE because the ECB sterilizes the effect on money supply by draining the same amount via one week deposit tenders. This comes after the ECB did not purchases any bonds in the previous three weeks and the reactivation may have implications on the ECB's exit strategy, for which further details will be forthcoming in early Dec.

The euro is still coming under pressure as earlier the Portuguese finance minister warns that it may need foreign assistance (or the probability is high). Ireland still does not appear to have asked for assistance and it is not clear that giving Ireland money, when it already has sufficient cash on hand for the next several months will ease the tensions in the region.

The euro is making new lows for the day. The pre-weekend low was about $1.3575. The euro is leading the move against the dollar. Last week, as the euro sold off, some of the other currencies, like the Australian dollar and Swedish krona were selling off even harder.