On 10 March, the ECB decided to broaden its bond buying program and start buying corporate sector bonds directly. Today, the ECB lends cheap money to banks, expecting them to pass them on to the corporate sector. However, due to prolonged low inflation, the ECB decided to add a new money channel directly to the corporate sector. Last week (on 21 April), the ECB´s Governing Council agreed on the parameters of the corporate sector purchase program (CSPP). The program will be initiated in June, non-credit institutions based in the eurozone will be eligible, provided that their bonds are denominated in the euro and their rating is investment-grade. Bonds will be bought on primary and secondary markets, however, bonds of public companies will only be bought on secondary markets to avoid “monetization of sovereign debts”. The bonds will be purchased by 6 national central banks on behalf of the Eurosystem (German, French, Belgian, Italian, Spanish and Finnish), coordinated by the ECB.
The ECB´s Governing Council also agreed to expand the overall bond buying program to €80 billion a month. Interest rates were left unchanged - the main one stays 0.00%.
2nd May 2018