The European Central Bank (ECB (Toronto: BCE-PA.TO – news)) will start on Wednesday to buy corporate debt in the euro zone , under the array of initiatives launched in recent months to kick-start inflation.
the issuing institution thereby finance the activity of pharmaceutical companies, airlines and automakers.
The ECB and ensures the acquisition of 80.000 billion monthly bond markets to try to pull the economy of the euro zone from its slumber.
That plan “quantitative easing” (QE, for its acronym in English) focused so far mainly on the acquisition of sovereign debt of the 19 countries in the currency bloc.
the QE, along with the drop in rates interest and huge loans banks make up the ECB’s strategy to boost the economy and ward off the specter of a deflationary spiral (falling prices, which delayed purchases and discourages investment).
from Wednesday, the Frankfurt-based institution acquire corporate debt, to facilitate the financing of companies and encourage them to invest.
the question remains whether the bread achieve its objectives. Many companies issue debt to invest, but also to repay loans.
Corporate bonds represent only a small proportion of the 80,000 million euros used monthly by the ECB to buy debt. Many analysts estimate that the volume will be 5,000 to 10,000 million. Experts from Commerzbank (Xetra: CBK100 – news) reduce that amount to a strip of 3000-5000 million
“The ECB should be launched on the market with small steps,” say the experts of the German bank. a note.
the market for these products is much smaller than that of sovereign bonds and the ECB set rules to restrict their room for maneuver. Shall not buy, for example, bonds issued by banks (Other OTC: UBGXF – news).
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