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European Central Bank corporate bond buying starts

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European Central Bank corporate bond buying starts

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The European Central Bank has started buying corporate bonds as part of its latest effort to get businesses to borrow and spend, thereby boosting the eurozone economy and causing inflation to rise.

Buying the debt of some of Europe’s biggest companies is an unprecedented move and comes on top of the ECB purchasing 80 billion euros worth of mostly government bonds each month – which hasn’t had a significant effect on the region’s growth or rock-bottom inflation.

Traders said the ECB has been buying the bonds of utility, insurance and telecoms companies, including Italy’s leading insurance company Generali and Spain’s Telefonica.

Other names being mentioned were Belgian brewer Anheuser-Busch InBev, French carmaker Renault and German engineering firm Siemens. Power companies Engie from France and Germany’s RWE were also believed to have been bought, along with chemical and and property firms under the Corporate Sector Purchase Programme.

ECB purchases were generally seen in the three million to five million euros range per trade and bond prices moved little. That suggested additional demand from the eurozone’s central bank was anticipated and had already been priced in.

We won’t find out exactly what bonds the Bank has bought until 18 July after which it will release word on its latest purchases weekly on Mondays.

Success will largely depend on the ECB’s ability to attract new borrowers and on cheaper borrowing costs trickling down to weaker economies like Italy’s and Spain’s, where costs remain high.

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