The ECB started buying corporate bonds to boost prices – Yahoo Finance Spain

By Balazs Koranyi and Laura Benitez

FRANKFURT / LONDON (Reuters) – The European Central Bank (ECB) bought bonds on Wednesday some of large companies in Europe, at the start of their purchases of corporate debt that are now part of its huge stimulus program designed to boost inflation and economic growth in the euro zone.

Among the operations more active in the secondary market included the titles of Italian insurer Generali, a debt issue 10-year Spanish group Telefonica and five-year notes of French Engie, operators and investors to IFR, a service of financial data from Thomson Reuters said .

After buying 1 billion euros in bonds, sovereign mostly from March 2015, the ECB now expects the incorporation of non-bank corporate debt encourage businesses to invest and accelerate growth in the block, which it is still struggling to overcome the final stages of its debt crisis.

Investors said the ECB appeared to be buying debt of companies with operations in a range of between 3 and 5 million euros. The bond prices were little changed, suggesting that the additional demand central bank has already been taken into account by the market.

In fact, yields on corporate debt had fallen sharply since the ECB unveiled plans in March in a sign that companies have been benefiting from the measure for months, even though the company had not yet begun their purchases.

“this is something rather bland so far as they are buying bonds of large companies, but by what we have seen seems that (the ECB) is now trying to diversify sectors to prevent price distortion, “said one investor.

But diversification could be difficult. The debt market high rating as can be bought has a value of between 500,000 and 600,000 million euros, but is mostly limited to large companies in France and the Netherlands. These entities already have easy access to credit, so their interest in cheap money may be limited.

“I think that in any case the key is whether this program will encourage investment in the real economy “said Alberto Gallo, portfolio manager and chief strategist macro Algebris investments.

” Until now, corporations are only using low borrowing costs to obtain cheaper financing, but investment and job creation there are stalled. for now, I think we also need more fiscal stimulus, “added

.

the long-term effectiveness of the initiative will depend largely on the ECB’s ability to attract new applicants loans and that lower borrowing costs reach weaker economies, such as Italian or Spanish, where yields remain high

.