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ECB Reverse Auctions to Add Competition in Extended QE Program

  • Reverse auctions may affect prices for dealers: MIT professor
  • New buying method `useful' in less-liquid markets, ECB says

Bond purchases under the European Central Bank’s quantitative-easing program in 2016 may surprise some investors who grew accustomed to trading on a strictly bilateral basis -- via a phone call, e-mail, or on private trading systems.

After buying more than 480 billion euros ($524 billion) since March in government and agency bonds where prices and targeted securities weren’t disclosed, the ECB will begin using more transparency in deals. Some of the 19 euro-area central banks that carry out QE now may use reverse auctions, where potential sellers compete to undercut one another on price, the Frankfurt-based institution said this week.