Luc Coene, European Central Bank Governing Council member, recently said that despite policy makers purchasing covered bonds for the past two days, there is no set plan to purchase corporate bonds to further stimulus.
In an interview with L’Echo newspaper, Coene said:
“We could extend our interventions to other instruments, such as corporate bonds,” adding “There is no concrete proposal on the table for the moment.”
On October 20 the ECB started buying covered bonds and it is set to buy asset-backed securities before the end of 2014.
Suki Mann, a strategist at UBS AG in London said in a note to clients yesterday:
“The very last thing we need is another marginal buyer of corporate bonds,” adding “Why would the ECB want to get involved and how much unsecured risk would they want?”
There have been rumors that the ECB will be buying corporate bonds to prevent the eurozone falling into deflation, with Reuters reporting that a decision could be made before the end of the year, citing people familiar with the matter.
However, two euro-region central bank officials with knowledge of the discussions told Bloomberg that policy makers are not talking about buying corporate bonds at the moment.
The ECB has a goal of inflation in the eurozone of just under 2 percent. Currently inflation in the area is at 0.3 percent, far off the ECB’s goal.
German politicians have expressed their concerns against buying government bonds on a large scale, with Bundesbank President Jens Weidmann highlighting the risks associated with doing so.
Gary Jenkins, a strategist at LNG Capital LLP, told Bloomberg:
“Introducing government bond QE is probably just too difficult an objective for the ECB to achieve just yet,” adding “That makes a corporate bond program more likely in my opinion, as Draghi may feel that they have to be seen to be doing something.”