ECB Commences EUR 1.1T Bond-Buying Program; German Yields Turn Negative (FXE)

The European Central Bank has commenced its €1.1 trillion bond-buying program today.

While market speculation pegs the ECB buying debt from countries like Italy, Germany, and France, specific purchases will be kept quiet by officials. The Financial Times believes German and Dutch debt were some of the first purchases to be made, citing people familiar with the situation on the information.

Bond prices rose amid the news. In early trading, the gap between U.S. and German debt had widened to a record with yields on German 10-year debt falling six basis points to 0.34 percent. Spanish and Italian debt fell by one basis point for equivalent maturities.

One issue highlighted today was how losses would be split on negative-yield purchases. While policy makers agreed to start purchases today, loses weren't taken into consideration. That means central banks might avoid those sorts of debt issuances for now.

Germany in particular has been uncomfortable with buying negative-yield debt and the overall agreement aims to limit risk-sharing to those banks that were adverse to quantitative easing measures.

Yields on German debt are now negative for maturities of up to seven years.

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