Taper Tantrum 2.0: German Bunds Tumble On Report ECB Is Preparing To Taper Bond Purchases
Someone at Reuters must be really short Bunds.
One week ago, 2Y German Bunds tumbled after a Reuters report came out, according to which the ECB was looking for ways to lend out more of its huge pile of government debt to avert a freeze in the 5.5 trillion repo market that underpins the financial system, manifesting in the surge in short-term Bunds. The effect of that particular report lasted for all of one day as the market realized that no matter what the ECB does, the collateral shortage is likely to persist.
Fast forward to today, when the same thing happened, only this time, to the long end, when Reuters reported that, in advance of its March 2017 meeting, the ECB was considering sending a “formal signal after its policy meeting next Thursday that the program will eventually end.” As a result, Bund futures quickly slid to session low, dropping ~30 ticks in 10 minutes, on the back of the Reuters report.
This post was published at Zero Hedge on Dec 1, 2016.