- Asset purchases include week following U.K. vote to quit EU
- Central bank bought EU6.4b of corporate bonds in first month
The European Central Bank bought 85.1 billion euros ($94.8 billion) of debt in June as it boosted its asset-purchase program before the summer holiday period, and as officials considered how to handle the fallout from the U.K.’s decision to quit the European Union.
Holdings of public and private-sector debt climbed to 1.08 trillion euros as of June 30, data on the ECB’s website showed on Monday. The period includes the week after the U.K. sent shockwaves through the financial system with its Brexit vote.
While the ECB had initially signaled that its quantitative-easing program was unlikely to be adjusted or extended over the summer months, President Mario Draghi must now decide whether the impact of the U.K. decision warrants a response. Policy makers are said to be concerned that the pool of securities eligible for QE has shrunk after investors piled into the region’s safest assets and pushed down yields on some sovereign debt too far to meet current criteria, Bloomberg reported last week.
The pace of buying in June was similar to May’s 85.2 billion euros and compares with a target of 80 billion euros a month. Holdings of sovereign and agency debt climbed by 72.1 billion euros last month, the ECB data showed. Corporate-bond purchases, under a program that started on June 8, were 6.4 billion euros. Covered bonds rose by 6.1 billion euros and asset-backed securities by 532 million euros.
The ECB didn’t accelerate purchases after the U.K. vote. Holdings of public sector debt rose by 9.7 billion euros versus 17.1 billion euros increase in the previous week. Buying of covered bonds and corporate debt also slowed. ABS purchases picked up slightly.
Executive Board member Peter Praet warned last week that Brexit may reverse some of the euro area’s recent investment and consumption gains. Some Governing Council members favor changing the allocation of bond purchases away from the size of a nation’s economy toward one more in line with outstanding debt.