Tomorrow, September 25th at 9:00am EST, Draghi will speak at a conference in Berlin.
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It is possible that in the conference tomorrow, Draghi could discuss OMT (Outright Monetary Transactions), the ECB’s bond buying program.
Any Draghi speech has the potential of being a very volatile time in the market. If Draghi is sharing about OMT, investors will be on the edge of their seat waiting for what Draghi has to say about this bond buying program. [/column]
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Let’s take a look at what OMT is.
OMT or, Outright Monetary Transactions is the ECB’s plan to buy government bonds with the intent of keep borrowing costs and yields low.
If you’d like to see the ECB release report, click here.
With OMT, there is an open ended commitment to buying the country’s bonds. With these unlimited purchases, it would be easy to compare the idea to the Fed’s QE3 but, OMT is sterilized. It is not quantitative easing.
When sterilized, bond purchasing is done with the ECB withdrawing an equivalent amount that it’s lending so it’s not printing money in a way that demands inflation.
If we have news that is affirming and positive for the OMT, I would think bullish movement would be soon to follow.
Draghi will also be meeting with German Chancellor Angela Merkel the same day according to Bloomberg.
The Euro Zone states are in preparation to allow their bailout fund to reach a capacity of 2 Trillion Dollars. Is it worth it to have available capital to bailout any potential Euro Zone states if they need rescued in the future?
For a calender of other upcoming fundamental events, click here.
Do you have any thoughts on OMT? If so, please share them below.
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