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ECB corporate debt buys unexpectedly high in first full week

The European Central Bank bought 1.9 billion euros worth of corporate bonds in its first full week of purchases, at the upper end of market expectations, signalling a strong start to its latest measure designed to revive inflation.

Unveiled in March as part of a 1.74 trillion euro asset-buying plan, the ECB started buying investment grade, non-bank corporate bonds on June 8. It hopes that lowering corporate borrowing costs will induce companies to invest, boosting inflation and economic growth.

A euro sign in front of the Headquarters of European Central Bank in Frankfurt.
Oed | Ullstein bild | Getty Images
A euro sign in front of the Headquarters of European Central Bank in Frankfurt.

On the programme's first day, the ECB bought 348 million euros worth of corporate debt, an unexpectedly large figure that was seen by analysts as unsustainable over the long term but was considered to show its strong commitment to the scheme.

Sources with direct knowledge had earlier said the ECB was hoping to lure new issuers to the market and would buy 5 billion to 10 billion euros worth of corporate debt per month if new debt sales ramped up.

If it fails to prompt more borrowing by firms, however, its purchases could level off in the 2-3 billion euros range, the sources said.

Many analysts have argued that the limited supply of corporate debt means it would be difficult for the ECB to go above 5 billion euros per month without causing serious distortions to the market.

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