FRANKFURT Jan 31 The U.S. Federal Reserve's
gradual decreasing of its bond purchases is likely to have only
a limited impact on euro zone bond markets, a European Central
Bank (ECB) working group said.
The minutes of the Jan. 21 meeting of the group, which
consists of experts from the ECB and commercial banks, also
showed that a minority of members warned that a positive
performance in the bond market could end abruptly.
The Fed started tapering in December and, since the ECB
group meeting, has decided to trim its bond purchases by another
$10 billion a month.
Markets in countries with large current account deficits,
such as Turkey and Argentina, have suffered steep losses in part
because of the prospect of less U.S. monetary stimulus, but the
euro zone has remained placid.
"The progressive reduction of the size of the Federal
Reserve's programmes for purchasing U.S. treasuries and
mortgage-backed securities is expected to be well absorbed," the
"Some (limited) spillovers to euro area government bond
yields cannot be excluded," they said, adding that the group did
not see any particular risks to the bonds of stressed euro zone
countries, given the underweight portfolio positions of
non-European investors in these securities.
The bond markets have seen "very positive performance" this
year, but "some members warned that the bull bond market could
also end abruptly", the summary of the discussion showed.
Turning to asset-backed securities, the group had only
meagre hopes that the market would grow significantly.
"The prospects of a meaningful revival of the European ABS
market were deemed to be low on account of the lack both of a
sufficiently large investor base and of interest on the part of
potential originators to issue at high yields," the minutes
(For a copy of the meeting summary, click on:
(Reporting by Sakari Suoninen; Editing by Pravin Char)