From a Goldman ‘one year on’ note on the euro crisis on Thursday (emphasis ours):
While the pros and cons of external technical assistance (and a break from market funding) are being debated, the ECB remains the main buyer of Portuguese government securities. Of the latter, more than three-quarters were held by residents of other EMU member countries (mostly financial institutions) at the outset of the crisis.
According to our estimates, around 20% of the marketable stock is now on the central bank’s balance sheet. Since May, the ECB has effectively removed from the private markets roughly the equivalent of the entire gross supply of Portuguese medium-to-long-term government bonds for 2010.
Central bank financing of national deficits, anyone?
So what was that gross supply?
According to Portugal’s debt office, €21.7bn of Obrigações do Tesouro gross issuance was sold during its 2010 funding programme. The ECB Securities Markets Programme’s current total stands at €73.5bn — so Goldman’s estimate would mean that about 29.5 per cent of the SMP is invested in Portuguese debt.
Cross-checking the number, this does tally with other estimates of the national mix in the programme, which usually apportion roughly a third each to bonds from Greece, Ireland and Portugal (and a purported price list from the ECB itself matches this mix). Greece likely has the greatest share given its most distressed position in the debt market since May’s bailout, while Ireland was probably targeted more intensely from the third quarter of 2010 onwards in the run-up to its bailout.
One other thing — while the ECB might well have bought ‘roughly the equivalent’ of all Portuguese medium- and long-term 2010 issuance, its actual bond-buys are likely clustered in five-year maturities or below. That’s where peripheral yield curves have been most distorted.
Of course, we can’t know any of the above for sure, given the ECB’s obvious interest in maintaining strategic ambiguity in the SMP — its primary means of impressing the market.
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Time for one other Iberian bond-buying estimate, by the way?
OK then. El Pais reported on Thursday that China has committed to purchasing €6bn of Spanish government debt. If we assume this is all going to be spent this year in the primary market on gross issuance of medium and long-term bonds — Chinese buying will amount to about 6 per cent of the €93.8bn planned total.
And we’re assuming the ECB won’t be there to back them up.
Related links:
What the ECB’s bond-buying has lost - FT Alphaville
Paper Tiger, Hidden Trichet – FT Alphaville