The ECB urges on corporate bonds – Economíahoy.mx

Isabel Blanco – 23:00 – 03.12.2016 – Updated: 02:00 – 03.13.16

• Some financial assets themselves eligible for the offensive of the ECB.

debt of European companies with investment grade has become an interesting asset that can provide gains in the coming months thanks to purchases of corporate bonds, not including banking, which will launch the European Central Bank since late June. Experts clearly choose this option compared to government bonds.

In a new attempt to revive economic growth and create inflation, the European Central Bank (ECB) made history again on Thursday. In a surprise move, Mario Draghi, the president of the institution, announced a series of aggressive measures in order that the expansionary monetary policy has effects on the real economy. Although it is much skepticism about the likely impact alone, without the structural reforms demanded by the Italian banker has long governments, the fact is that some other financial assets eligible for ECB offense. This time is the debt of non-financial companies and investment grade bonds without including trash- one of the clear winners.

The central bank allocated for the first time, part of its purchases of fixed income these assets. Still “have to define operational measures, and all we know is that it will start buying late in the second quarter,” Fernando Garcia, director of Capital Markets for the corporate sector and banking Societe Generale said but, regardless of the details, “will have a very positive effect on spreads and sentiment regarding credit, because the ECB is a buyer with a very high capacity”.

All the experts consulted agree this idea. The expectation is that prices of corporate debt rise to the large inflow of money, but what part of the 80,000 million euros a month that has raised the QE will target the corporate is not known. “Obviously, many investors are going to launch buying bonds (so that it will raise its prices and lower profitability) pending that in the future these bonds can be purchased by the ECB,” says Miguel Llorente, manager Value Tree heritages.

not only that, but there unanimously expect corporate debt to behave better than the government in the coming months, although the monetary institution will be acquiring both. “As there is a bubble in the market sovereigns, we believe that the ECB’s decision will first have a favorable impact on private corporate bonds of high quality,” notes David Poulet, fixed income manager Amiral Gestion.

There is a clear argument that private debt can be the great beneficiary, even more than has been the public in these months of purchases. And the sovereign debt market is much larger, and the capacity for action of the ECB is less, while “corporate bond market is eight times smaller, so that the entry of such a strong buyer affects more prices, “said Victor Alvargonzález, director of strategy Tressis. And it puts a simile: “It’s like a big buyer enters a small bag in value.”

The dimension of European debt would be on the radar for potential purchases of the ECB is around 500,000 million euros in Europe, according to estimates by an investment bank consulted.

the market is already decanting more corporate debt. On Friday, the Spanish 10-year bond gained 0.89 percent, and profitability fell to lows of December, in the 1,485 percent, but the rise was higher, 1.63 percent in the price of Telefónica issued debt maturing in 2013.

There is another compelling reason to anticipate further gains in private debt. “In recent months, credit spreads in Europe (the premium paid for having a corporate bond and not one of government) had risen to levels not seen since 2011, so corporate bonds and was more attractive than public, “says Miguel Llorente. “From now on corporate debt can also function as a shelter [until now was the public] in times of market turmoil,” he says.

Some indices already collected appetite was emerging for these bonds . Bloomberg is the case of European Bond Euro Investment Grade. “The rally began in mid-January. Corporate bonds have rallied more than 1 percent [by this index] this year, which is much in fixed income assets. And more when compared with other assets as the bag “said Victor Alvargonzález.

in the universe of European bonds, Spaniards are among those that could go more favored. So believes Fernando Garcia, who believes that “there will be some convergence of peripheral bonds to non peripherals. Not totally, by the rating differences” qualifies, but “will reverse what happened in January and February,” when the the periphery did worse volatility.

There is another important point. All this, in the end, leads to a drop in financing costs, so the figure of the ECB as a buyer of corporate debt may encourage companies to go out more market and encourage new issuers. “The market had opened a couple of weeks ago,” and the measure announced by the ECB “underpins this trend,” said Societe expert. In fact, operations for funding cheaper is not waiting. Valeo, the French company’s products and automotive services, placed 10-year bonds on Friday with more than 7,000 million euros, Fernando García greatly appreciates, and a narrowing of the spread demand.

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