ECB to buy government bonds below deposit limit; unchanged for corporate bonds
Following discussions over tweaking its quantitative easing programme, the European Central Bank confirmed that it would begin to buy government bonds with a yield below its -0.4 per cent deposit rate.
In details following its latest monthly decision to keep rates and QE unchanged, the ECB said it would not however drop the yield floor for its corporate or covered bonds purchases that make up its €80bn a month stimulus package.
Instead, policymakers said they would continue to give priority to government debt “above the deposit facility rate”,
“This means that the amount of purchases that have to be made at yields below the deposit rate will vary among jurisdictions” said an ECB statement.
The tweak was announced amid fears the ECB could be hit with a scarcity of eligible debt as a bumper bond rally drove German short-term yields to record negative lows. The yield floor was initially put in place last year, to match the -0.4 per cent deposit floor.