• In today’s Comment we want to take a closer look at the ECB’s new spread control tool. But before we start, a little bit of history first. Remember former ECB President Draghi’s bond buying program dubbed Outright Monetary Transactions (OMT in the ECB’s alphabet soup)? It’s the never-used program that Draghi launched in the summer of 2012 that ended the Eurozone crisis at a stroke. Under the OMT, in exchange for a Troika-supervised bailout program, the ECB would buy potentially unlimited amounts of shorter maturity bonds (up to three years) of a member state that was under speculative attack and/or experiencing capital flight. The OMT announcement and the political support for the program from Berlin and Paris brought spreads back down to earth. The ECB’s program even survived a myriad of court cases brought before the European Court of Justice and the German Constitutional Court.

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