Super Mario Buys Sovereign Bond The ECB announced its new sovereign bond purchase program called Outright Monetary Transactions or OTM and will buy 1 to 3yr government bonds in the secondary market. The EU Treaty prevents ECB from purchasing government bonds in the primary market, but Article 18 allows it to do so in the secondary market as a tool for monetary policy. Countries who qualify for this program must accept the conditions come with the European Financial Stability Facility/European Stability Mechanism program. Countries will also need to sign a memorandum of understanding on the macroeconomic adjustments. There is no upper limit on quantity and government bonds of Greece, Portugal and Ireland will be qualified once these countries regain their bond market access. ECB will not claim senior creditor status on purchases associated with the OMT and will publish the market value of its holdings on weekly basis. The only thing that wasn’t specified is whether the maximum 3yr tenor is the original or the remaining time to maturity. In other words, we don’t know if ECB will buy something like a 10yr bond that matures in 2015. We will be following this for you, meanwhile please share with us your reaction. The S&P rallied to a 4yr high, what about you? You can send in comments to our show or you can tweet us @FNNOnline.