The ECB started buying corporate bonds to boost prices – Investing.com Spain

By Balazs Koranyi and Laura Benitez

FRANKFURT / LONDON (Reuters) – The European Central Bank has started on Wednesday to buy corporate bonds, buying bonds energy, insurance and telecommunications companies, in their last effort to revive inflation in the euro zone.

by adding debt to investment grade asset purchases of 1.740 billion euros, the ECB expects further reduce borrowing costs. That would give businesses incentives to invest, fueling faster growth in the bloc, which still struggling to overcome the final stages of its debt crisis.

Traders said the ECB was still active in the market secondary, one of his first purchases a bonus to five years of an energy, according to IFR, a service of Thomson Reuters.

investors said the central bank seemed to be also buying debt of companies like insurer Generali (MI and phone operator Telefonica (MC :), with purchases in the range of between 3 and 5 million euros.

Although it was not immediately clear what was buying bonds the ECB, the profitability of one of the bonds of Telefonica [ES139476468 =] fell between 3 and 6 basis points on Wednesday, a relatively strong movement.

the program will face serious obstacles. The debt market high rating as can be bought has a value of between 500,000 and 600,000 million euros, but largely confined to large companies in France and the Netherlands. These entities already enjoy easy access to credit, so their interest in cheap money may be limited.

The success will depend largely on the ECB’s ability to attract new borrowers and lower borrowing costs reach weaker economies such as Italian or Spanish, where costs remain high.

“at this point, the ECB itself probably is not sure how much you can buy,” he said analyst Deutsche Bank (DE Michal Jezek. “For example, we might see in a few months heavy purchases of between 9,000 and 10,000 million euros and others, as in August, say it could be 1,000 or 2,000 million euros, while most months will be an intermediate amount”.

Jezek expects a record debt issues in euros this year, with 250,000 million euros gross issued, more than 100,000 million euros in net terms.

About half of that figure come from companies in the euro zone, in response to ECB purchases.

the ECB does not set targets for buying and will probably start slowly, prepared for large fluctuations and accelerating the pace over time. Expects to buy between 5,000 and 10,000 million a month if successful when inducing new issues, said sources close to the ECB Reuters.

If no new significant emissions, volumes may be limited. Some sources euro zone argue that purchases could be between 2,000 and 3,000 million per month.

The ECB is buying every month about 80,000 million euros in assets, mostly government bonds, at least until March 2017. But inflation is not accelerating and is expected to force the bank to extend the period of shopping. That would increase the risk of having trouble finding assets to buy, encountering liquidity shortage or stiffness of the self-imposed limits.

Although some analysts expect the ECB to actively participate in the primary market, its commitment to buy proportionately debt already in circulation will force you to also buy in the secondary market.

“The time (the start of the program) suggests that the ECB is aware of bringing out the best of the shopping period before the summer lull, “she said Morgan Stanley (NYSE in a note.

“We expect the average rate of life of the purchase of corporate bonds is of between 3,000 and 5,000 million euros per month, in (markets) primary and secondary).