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ECB owns 1 trillion euros of govt debt

The ECB owns to 1 trillion euros ($A1.48 trillion) in government bonds, after it bought 11.14 billion euros worth in the week to September 2.

After 18 consecutive months of buying government bonds to pump up the economy and raise inflation, the European Central Bank's holdings hit a landmark last week - 1 trillion euros ($A1.48 trillion).

Whether it is working remains to be seen, especially as it is hard to gauge how bad the euro zone economy would have been without the purchases.

But when the ECB bought 11.14 billion euros worth of government bonds in the week to September 2, it took the total it owns to 1 trillion euros. Including corporate, covered and asset-backed bonds, last week's ECB purchases came in at 13.75 billion euros.

One and half years after the ECB started buying state debt, results are mixed at best. Bank lending has rebounded but it remains sluggish and inflation is still stuck near zero.

The ECB's decision-making body will meet again on Thursday and, while President Mario Draghi is not expected to make any announcement, he may hint at the prospect of extending the asset-buying scheme beyond its current end date in March.

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But prolonging the purchases again would be challenging when the ECB has already bought so much, because it risks further distorting market prices and even running out of bonds to buy.

Germany's government bonds with a maturity of up to 10 years already trade at a negative yield, which means that if an investor bought that debt now and held it to maturity they would get less money than they paid.

Some corporate credit bought by the ECB, including some debt issued by Swiss food group Nestle and French telecoms operator Orange, also yield less than zero.

To make room for more purchases, the ECB would consider raising a limit on how much of each bond issue it can own or looking at new asset classes, sources told Reuters earlier this year.


2 min read

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Source: AAP



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