The European Central Bank envisions buying large volumes of sovereign bonds for a period of one to two months once its "OMT" program is launched, but would then suspend purchases during an assessment period, senior central bank sources told Reuters.
Until now, the details of how the ECB plans to conduct the bond-buying program unveiled last month by President Mario Draghi have been murky.
Economists have questioned what the bank's exit strategy might be, or in other words how it would put a stop to "Outright Monetary Transactions" once it had begun to buy the sovereign debt of struggling eurozone countries.
The answer appears to be that the ECB would suspend its purchases on a regular basis for a period that could last up to a month or more.
During that time, inspectors from the EU or "troika" — the ECB, European Commission and International Monetary Fund — would assess whether a country is meeting the conditions of its aid program. An aid program is a prerequisite for the ECB to intervene in the secondary bond markets.
Once a country agreed a rescue package with its EU partners, the ECB would open a buying window of "one to two months", one of the sources said.
"After that period the ECB will stop buying and there will be an assessment phase. After that assessment it will be decided if the ECB buys more or stops," the source added. "We will go in the market heavily during the time the window is open."
A second source confirmed the procedure. Multiple officials said the Bundesbank, which opposes Draghi's OMT program, would still participate in the bond-buying, which would be conducted by national central banks based on their share of ECB capital.
The ECB declined to comment, as did the Bundesbank.
Draghi hinted at the plan during the opening statement of his news conference on Thursday in Slovenia.
"We would exit from OMTs once their objectives have been achieved or when there is a failure to comply with a program," Draghi said. "OMTs would not take place while a given program is under review and would resume after the review period once program compliance has been assured."
Draghi made clear on Thursday that the ECB stood ready to start the OMT program, but said the onus was on governments to seek aid first.
Spain is seen as the most likely candidate for ECB bond-buying, but so far its government has not made a formal aid request to its European partners.
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