European Central Bank governing council member and Bundesbank President Jens Weidmann was on the wires earlier today sharing his take on the ECB's asset purchase program. Weidmann said the ECB's bond-buying programme could be adjusted to prevent a scarcity of eligible debt throwing it off track.
Since the start of the QE programme there has been a significantly parallel shift in the entire German curve. During the programme we have seen 8-year bonds being ineligible due to a too low yield, although after a minor sell-off, 7-year bonds now trade virtually at the deposit rate. ECB bought German bonds with a maturity of 10.5 years in July due to the flat German curve and bonds being scarce.
Scarcity problems indicate that ECB will hit its restrictions early next year so technical changes to the programme will come. Weidmann however warned that allowing special conditions or focusing more on highly indebted countries would further blur the boundaries of monetary and fiscal policy, raising questions about ECB independence.
The German bunds gained on Thursday following Weidmann's comments. The yield on the benchmark 10-year bond fell 1-1/2 basis points to -0.048 percent and the yield on short-term 3-year note slid 1/2 basis point to -0.630 percent by 10:40 GMT. Meanwhile, the German stock index DAX Index traded 0.63 percent higher at 10,234 by 10:40 GMT.
