ECB May Extend QE to State Corporation Debt, Hansson Says

The European Central Bank may decide on including bonds of state-owned companies in its quantitative easing program in the coming months, Governing Council member and Estonian central bank Governor Ardo Hansson said.

Debt issued by Elering AS, Estonia’s government-owned electricity and gas grid operator, is more likely to get approval because “this is clearly a monopoly and no questions about distorting competition can be raised,” Hansson said in an interview with Kuku Raadio on Thursday. Bonds of state-owned electricity and shale-oil producer Eesti Energia AS may also be eligible, he said.

The move would help expand the list of eligible targets for bond purchases for Estonia’s central bank, which last month spent 117 million euros ($126 million) on European institutional debt as Estonia has no outstanding government bonds. Lithuania, another Baltic euro member, struggled to fill its quota of purchases in the first month of the 1.1-trillion-euro QE program.

“In the second stage it will be discussed -- we hope during the coming months,” whether to include state-corporation debt, Hansson said. “As there has been talk of state-owned Eesti Energia and Elering in our case, they would be part of that group. No decisions have been made yet.”

‘Flexible’ Program

ECB President Mario Draghi said at a press conference in Frankfurt on Wednesday that the central bank’s bond-buying plan is “flexible enough to be adjusted” if needed. Some investors are concerned that the ECB will struggle to find enough eligible debt to complete its bond-buying program. Draghi said the concern was “premature.”

While the ECB decided not to include private-sector corporate bond purchases when it started its QE program in March, Hansson had argued that they should be considered.

“We should be looking at the universe of corporate bonds,” he said in an interview with Bloomberg News in January. “If you think what we are trying to achieve -- getting inflation on a slightly higher path than it is right now -- we can achieve that by increasing demand. Demand can come from the government or from the private sector.”

Before it's here, it's on the Bloomberg Terminal.