ECB Slows Asset Purchases Even Amid Draghi Balance-Sheet Pledge

The European Central Bank slowed asset purchases last week, underlining the challenge for policy makers trying to expand the institution’s balance sheet.

The ECB settled 233 million euros ($286 million) of asset-backed-securities purchases in the week ended Dec. 5, after spending 368 million euros in the first week of the program. The Frankfurt-based central bank also bought 3.126 billion euros of covered bonds, down from 5.078 billion euros the previous week.

ECB President Mario Draghi has held out the prospect of yet more stimulus to boost the balance sheet when policy makers review current measures early next year. The ECB is preparing broad-based asset purchases, including government bonds, with any decision at its Jan. 22 meeting linked to incoming information, two officials said.

A key piece of data for policy makers’ deliberations will be demand this week for a second round of long-term loans aimed at boosting credit to the real economy. Analysts in a Bloomberg News survey predict a take-up of 148 billion euros, according to the median of 24 estimates. An initial offer in September injected 82.6 billion euros, less than economists forecast.

Since the ECB started asset purchases in October, it has spent a total of 21.528 billion euros. It bought 20.927 billion euros of covered bonds and 601 million euros of ABS.

Draghi said last week that one reason for why ABS purchases have been muted is because the program started at the end of the year. December was among the three worst sales months in every year between 2010 and 2013, and new issues of the debt this month are on course for the second-lowest total of 2014, according to JPMorgan Chase & Co.

“Draghi indicated that the ECB is not willing to crowd out other investors, and in ABS in particular, the program is also designed to revitalize the market,” Ruben Van Leeuwen, an analyst at Rabobank in Utrecht, the Netherlands, wrote in a note to clients today. “At the same time, the attention to the ECB’s balance sheet size has increased further.”

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