Finland’s central bank has emerged as a buyer of Irish corporate bonds for the European Central Bank’s recently expanded quantitative easing programme to revive economic growth.
Bonds issued by the DAA, ESB, Ryanair and Kerry were bought by the Helsinki-based bank on behalf of the ECB, which began its company bond-buying programme on June 8th. The figures were published for the first time by the ECB on Monday along with details of the six central banks it has used to buy notes on its behalf.
All told, the ECB has bought about €10.4 billion of bonds issued by 150 companies under the five-week-old stimulus programme. Companies including French foodmaker Danone, miner Glencore and Spanish power company Enel were among those to see their bonds acquired under the fledgling plan, according to the data, which did not divulge the size of individual bond holdings.
“The extent of the programme is massive,” said Jeroen van den Broek, ING’s head of debt strategy and research in Amsterdam. The ECB is buying more than €300 million of bonds per day “in a very illiquid market”, he said.
The ECB has been buying government bonds and other securities for more than a year, and in March cut its main interest rate to zero in an effort to kick-start a euro zone recovery and prevent the 19-member currency area sinking into a deflationary spiral.
Last month, it added corporate bonds to the mix.
Investment grade
The ECB can only buy bonds that are deemed investment grade by at least one of the main ratings agencies. Irish companies such as ESB and DAA were among the companies to sell bonds in the weeks leading up to the ECB programme.
The purchase programme helped cut average borrowing costs for investment-grade companies in euro to a record-low 0.77 per cent last week, based on Bank of America Merrill Lynch index data. The average premium investors demand for corporate bonds rather than government debt has fallen to 118 basis points, the least in almost a year, the data shows.
The French and German central banks appear to have been the most active players in the corporate bond market buying securities for the ECB in the past five weeks. The Belgian, Spanish and Italian central banks also bought notes.
