Market reversal, initially triggered by some disappointment on the Euribor fixing

A typical Tuesday reversal, initially triggered by some disappointment on the Euribor fixing which sadly seems to be the only thing that really matters in rates space those days and followed through with some solid economic number from the US. Some ECB members, Nowotny and Coeure, following their mid-month meeting, have also dampened expectations of an interest rate cut in October, as fresh speculations about the effectiveness of the ECB’s new bond buying program are emerging : German tabloid Bild reported that in-house lawyers at the ECB and the Bundesbank were checking both what proportions and duration the program could reach before it might breach EU treaties. Bild said the central banks were preparing for the possibility of the issue being referred to the European Court of Justice. The newspaper did not reveal its sources and neither central bank was willing to comment on the report. This report came a day after David Marsh, chairman and co-founder of the Official Monetary and Financial Institutions Forum (OMFIF), speculated that the Bundesbank might use Article 10 of the ECB’s statutes to limit any bond buys under the OMT once it becomes operational. “Article 10 of the ECB’s statutes says that the one-man-one-vote method should not apply to ECB decisions affecting its capital, transfer of national central banks’ foreign assets, allocations of monetary income and net profits and losses,” Marsh wrote. “If the OMT does indeed get going, the Bundesbank may have some legal tricks up its sleeve to limit its implementation.” There is still nothing like a good Euro area mish mash…