ECB Begins Bond Buying

The euro made its way above $1.28 on Tuesday morning after the European Central Bank began to make good on its September promise to buy covered bonds on Monday. The common currency traded at $1.2818 at 7:00 GMT as investors wondered whether or not the ECB’s efforts were enough to revive the eurozone’s struggling economy.

The Wall Street Journal reported that the ECB bought bonds backed by loans such as mortgages for a range of prices, some as high last 25 million euros. The bond buying program is a part of the bank’s September easing package, which did not specify a limit for the purchases.

While markets were dubious about the impact of the purchases, the ECB is hoping that freeing up some of the banks’ cash will spur on lending and kickstart the bloc’s failing economy.

The purchase program began just days before the ECB is set to release its asset quality review results, something markets are eager to see as it is expected to provide a better picture of the region’s financial health. The ECB’s analysis is a critical piece in restoring investor confidence in the region as these checks were carried out with exactly the same criteria from country to country, something that is meant to make the eurozone’s banking system more transparent. 

Though the results are expected to be positive, most believe that Saturday’s asset quality review results will not be enough to restore confidence in the region. However, the ECB’s role in overseeing the bloc’s financial system is likely to help streamline the financial system and keep banks from another crisis.