Mario Draghi: ECB to start buying covered bonds this month
Mario Draghi, the president of the ECB, has said the Bank will be prepared to take on below investment grade asset-backed securities (to BBB-), opening the door to Greek and Cypriot banks.
The central bank will start buying covered bonds and asset-backed securities this autumn, starting with the bond programme in mid-October. The programme will last two years.
The inclusive nature of the ABSPP would come with prudence, the governor indicated. Countries must have programmes with the EU, he said, emphasising that this was not negotiable.
Speaking in Naples today, Draghi said the new measures, which will come alongside “targeted longer-term refinancing operations” would have “a sizeable impact on our balance sheet”.
The ECB’s balance sheet is currently at around €2 trillion, with €700bn of that being ABS.
The expansion would increase that to around €3 trillion. Should the new measure be insufficient, the only option left to the ECB may well be full-blown quantitative easing, or the purchase of sovereign bonds.
Inflation, Draghi said, was the main target (just below two per cent), and the size of the ECB’s balance sheet was just an instrument in the pursuit of the mandate. The president said he expected inflation (CPI) to remain low in the short term, rising during 2015 and 2016.
In a move that may anger Berlin, Draghi added that countries with “fiscal space”, such as Germany, should use it and invest to stimulate the economy.
Source: cityam- Mario Draghi: ECB to start buying covered bonds this month
