ECB Keeps Up Corporate-Bond Buying Pace Even as Issues Slowby
Central bank purchases 1.9 billion euros of company debt
New-bond sales cool as U.K. referendum roils markets
The European Central Bank bought 1.9 billion euros ($2.2 billion) of company bonds in its first full week of purchases, as Mario Draghi expanded efforts to boost the region’s flagging economy.
The bank’s holdings of company debt climbed to 2.25 billion euros on June 17 from 348 million euros a week earlier, based on data reported on its website on Monday. The ECB started acquiring investment-grade corporate bonds on June 8, and first-day purchases surpassed analysts’ expectations.
The ECB maintained buying even amid a slowdown in issuance caused by market volatility in the run-up to the U.K.’s June 23 vote on whether to leave the European Union. That may support optimism among investors who rushed to buy notes before the start of the program.
“This shows the ECB can keep up the high pace,” said Hyung-Ja de Zeeuw, an Amsterdam-based senior credit strategist at ABN Amro Bank NV. “Most of the purchases must have been done in the secondary market as primary market activity has been subdued due to Brexit concerns.”
De Zeeuw had forecast purchases of between 1.8 billion euros and 2 billion euros in the week ended June 17. The report only includes completed transactions. Corporate-bond trades in the secondary market typically take two days to settle, while new issues take at least three days.
“This is more than we expected, and shows the ECB means business,” said Bernhard Gruenaeugl, a credit strategist at Commerzbank AG in Frankfurt, who forecast a maximum of 1.7 billion euros of buying. “It’s indeed a strong start to the program.”
Issuance of investment-grade corporate debt has slumped to about 11 billion euros this month from about 34 billion euros of investment-grade sales in the first 19 days of May, according to data compiled by Bloomberg. Christian Dior SE was the only non-financial company to sell euro bonds on Monday.
Investors snapped up investment-grade corporate bonds after the ECB said in March that it planned to buy euro-denominated notes as part of quantitative easing measures. That demand has helped drive down borrowing costs in the single currency, with the average yield for highly rated securities dropping to 0.96 percent, three basis points off a record low, according to Bank of America Merrill Lynch index data.