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ECB buys more bonds than countries sell to cap yields

The European Central Bank bought many more bonds in the last two months than the euro zone’s top four countries sold, in an effort to cap borrowing costs for a bloc still recovering from the coronavirus pandemic, data showed on Monday.

The ECB bought 134.7 billion euros ($160 billion) worth of government bonds issued by Italy, Germany, France and Spain across its stimulus schemes in June and July, compared to a net supply of just 89 billion euros from those countries, according to UniCredit estimates from July 19.

Such outsized purchases of government debt have unsettled some of the euro zone’s more conservative policymakers.

Belgium’s central bank governor, Pierre Wunsch, has raised the spectre of “fiscal dominance” – or the ECB losing its independence from governments – and Germany’s Jens Weidmann has often said the lines between both policies risked becoming blurred.

The ECB has pledged to keep credit easy to help the euro zone’s economy recover the ground it lost during a virus-induced recession and to put inflation on track to reach its 2% goal.

At its July policy meeting, the central bank said it wouldn’t raise rates until that goal was within sight and pushed back a decision on the future of its bond-buying scheme to the autumn.
Source: Reuters (Reporting By Francesco Canepa; Editing by Toby Chopra)

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