May 8, 2018 / 8:16 AM / in 6 months

ECB says its corparate bond buys sharply lowered bond spreads

FRANKFURT, May 8 (Reuters) - The European Central Bank’s corporate bond purchases significantly lowered borrowing costs and boosted issuance volumes for euro zone firms even as such financing remained concentrated on a handful of countries, it said on Tuesday.

The ECB has bought 152 billion euros worth of investment-grade debt since announcing the Corporate Sector Purchase Programme in March 2016, in the hope of inducing corporate spending and generating growth and inflation.

“In the subsequent period ...(to) the end of December 2017, the CSPP accounted for a decline in corporate bond spreads of, on average, 25 basis points for eligible bonds, 10 basis points for ineligible investment-grade bonds and 20 basis points for all ineligible bonds,” the ECB said in an Economic Bulletin article.

“For eligible bonds, the CSPP can be credited with almost the entire decline in spreads since the announcement of the programme.”

The corporate bond purchases, excluding banks, are part of the ECB’s 2.55 trillion euros quantitative easing scheme, credited with putting the euro zone on its best growth run in a decade even if it has failed to raise inflation as expected.

Corporate bond issuance was roughly 50 percent above the previous years’ trend in both 2016 and 2017 with much of this increase attributable to the ECB’s transactions.

The ECB’s buys induced a notable rise in corporate issuance in France, the Netherlands and, to a lesser extent, Italy, the ECB said. However, net issuance remained highly concentrated on five of 19 euro zone countries: those three plus Germany and Spain. (Reporting by Balazs Koranyi; editing by John Stonestreet)

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