The ECB Bond-Buying Program (OMT) could be capped to €524 billion

On June 11/12, the German Constitutional Court will conduct a public hearing regarding the ESM and OMT. In this context, the ECB should provide details about the terms of OMT to secure that the mechanism would not be prohibited.


According to an article published by FAS this morning, the ECB would have fixed a limit of €524 billion to its bond-purchasing program to assure a smooth passage and avoid a legal challenge.
More from Bloomberg Businessweek:

“European bailout policy will come under scrutiny this week as Germany’s Federal Constitutional Court holds a hearing from June 11 on the country’s participation in Europe’s main rescue fund as well as the ECB’s bond-purchasing program, whose establishment last year was credited with easing market turmoil.
The ECB dismissed a report in the Frankfurter Allgemeine Sonntagszeitung that a limit had been set to the bond-buying program, known as Outright Monetary Transactions. FAS reported that the central bank had communicated a limit of 524 billion euros in a court brief ahead of this week’s hearing as a way of making the program less vulnerable to a legal challenge.
That amount is the total sum of Spanish, Italian, Irish and Portuguese debt with one- to three-year maturities, FAS reported today, citing unidentified central bank officials.”

Yet, the FAS article should be taken cautiously as an ECB spokesman told Reuters that the report is incorrect:


“As indicated on various occasions, there are no ex-ante limits on the amount of Outright Monetary Transactions. Their size would be adequate to meet their objectives.”