ECB to set thresholds for bond purchases

The ECB is considering setting interest rate thresholds for any purchases of struggling eurozone member bonds, so that it would buy such bonds if their interest rates exceeded a certain premium over German bonds, it has been reported.

Germany’s weekly Spiegel magazine said yesterday that the ECB would decide whether to implement such thresholds at its September meeting. The measure would signal to investors what interest level the ECB considers appropriate. That would discourage speculators from pushing yields above the level set by the eurozone’s central bank, the magazine said.

The ECB said it had no comment to make on the report. Earlier this month its president, Mario Draghi, signalled that the bank may start buying government debt to reduce crippling Spanish and Italian borrowing costs. But he also said any intervention would only come if governments requested eurozone aid first. That, in turn, would be linked to conditions.