ECB buying corporate bonds to boost eurozone economy – Management Journal

THE ECB already cut rates to virtually zero percent and flooded financial markets with massive purchases of securities sovereign debt.

The ECB announced in March his intention to intervene in that segment.

Berlin ( AFP ) .- the European Central Bank started buying corporate bonds today, as part of the arsenal of measures launched in recent months to boost growth and inflation to take off the euro zone.

ECB already cut rates to virtually zero percent and flooded financial markets with massive purchases of securities sovereign debt. From now on, also purchase corporate bonds in secondary markets, to give investment margin.

The institution refused to specify which firms benefited from the operation were, but sources cited by the Bloomberg News reported purchases of bonds largest brewer the world, the belgo-Brazilian AB InBev as well as the French automotive group Renault, the Spanish Telefonica, the German industrial conglomerate Siemens and Italian insurer Generali.

ECB rose in March 60,000 million to 80,000 million euros monthly intervention in debt markets of the 19 countries in the region EUR. The sum was allocated so far mainly to the purchase of sovereign bonds, but it was already expected that a portion of that amount, which must be maintained until March 2017, began to devote himself to the acquisition of corporate debt.

Billions per month.
The program causes concern in some financial means. The German conservative daily Die Welt warned that the issuing institution was entering “uncharted territory” and that bond purchases could cause “massive distortions” in the market for corporate debt and even create a speculative bubble.

the ECB claims that its goal is to help reduce financing costs for companies and encourage them to invest without necessarily resorting to banks, although acting wisely. To maintain neutrality, purchases will be made respecting the nationality of the firms operating in that market.

Corporate bonds only represent a small proportion of the 80,000 million euros used monthly by the ECB to buy debt. The analyst estimates vary from a minimum of 3,000 million to a maximum of 10,000 million.

ECB also set rules restricting their room for maneuver. Shall not buy, for example, bonds issued by banks.

If you buy monthly 5,000 million euros until March 2017, you would with a maximum of 10% of the corporate debt market.

“A limited impact.”
ECB in March announced its intention to participate in that segment. A decision unprecedented for a central bank, which heated the market.

The rates of sovereign bonds fell since sharply and new corporate issues chained, including the most substantial history launched in March by AB InBev, more than 13,000 million euros.

But since then the situation practically standardized and markets anticipated the official start of operations.

the program shopping “and was integrated by the market,” says Louis Harreau, strategist at Credit Agricole CIB in Paris. Analysts at Unicredit also provide a “limited impact” on current rates.

Jack Allen, of Capital Economics, also expects the program to have a significant impact on investment and thus on the rate of growth and inflation in the euro zone.

the experts of the German bank Commerzbank believe there will be a “relief” in sovereign debt markets where securities are scarce because of appetite shopping ECB .

the institution of Frankfurt communicated on July 18 its first balance of these interventions.