OMT

It backed up this statement by action, first by the introduction of an Outright Monetary Transaction program and then by a massive round of quantitative easing that saw a US$3 trillion expansion in the size of the ECB's balance sheet.

The European Court's announcement yesterday according to which the ECB's Outright Monetary Transaction program is compatible with European legislation resulted in a reduction of the yield of Greek government bonds to 8.99%.

The ECB's Outright Monetary Transaction program, announced in August 2012, succeeded in substantially reducing sovereign borrowing costs in Europe's troubled economic periphery (see figure 2).

The ECB cheered investors in September with its bond-buying programme, which is known as the outright monetary transaction and has seen the central bank buying bonds between one and three-year terms which can have no limits.

Global Banking News-November 28, 2012--ECB ready for purchases under Outright Monetary Transaction programme(C)2012 ENPublishing - http://www.enpublishing.co.uk

The possibility of directly purchasing debt certificates from the ECB (outright monetary transaction) was welcomed, as was the European Council's decision to allocate 6 billion to the fight against youth unempoyment.

Jose Vinals, the head of the IMF's monetary and capital markets department, warned that countries must not withhold help if Spain were to ask the European Central Bank to buy its bonds under a new bailout programme, known as OMT for Outright Monetary Transaction.

Since ECB President Mario Draghi announced, last July, his intention to do "whatever it takes" to save the euro, and since the introduction by the bank of its outright monetary transaction (OMT) programme, Italian and Spanish bond spreads have dropped dramatically and the sword of Damocles does not hang over the eurozone leaders and bureaucrats any more.

The ECB's outright monetary transactions (OMT) scheme -- whereby the ECB promises to purchase bonds issued by eurozone member states on secondary sovereign-bond markets -- is also generating significant uncertainty.