January 2, 2017 / 4:19 PM / 7 months ago

GRAPHIC-One in five euro bonds yields less than ECB's deposit rate

2 Min Read

* ECB can start buying below -0.4 pct on Monday

* Amount of debt yielding less than that rose tenfold in 2016

* To see a chart: tmsnrt.rs/2iZH5qU

By Francesco Canepa

FRANKFURT, Jan 2 (Reuters) - The number of euro zone government bonds that yield even less than the European Central Bank's negative deposit rate rose tenfold last year to some 1.2 trillion euros, or a fifth of a widely used market index, IHS Markit data shows.

To see a chart: tmsnrt.rs/2iZH5qU

Starting on Monday, the ECB can buy debt yielding less than its -0.40 percent deposit rate as part of its two-year old, 2.3 trillion-euro money-printing programme aimed at reviving growth in the euro zone by flooding it with cash.

A negative yield, which means the ECB will get less money than it paid for the bond if it holds it until it matures, reflects investor expectations that ECB rates will remain low in the short term, strong demand for high-rated debt and an oversupply of cash.

The change to the programme, announced last month, is aimed at allaying fears the ECB would run out of eligible paper to buy after yields on short-term debt issued by cash-rich countries such as Germany, the Netherlands and France fell below the deposit rate.

The three countries account for nearly 84 percent of the 1.2 trillion euros worth of debt yielding less than -0.40 percent on the iBoxx euro zone sovereign bond index.

The ECB pushed its deposit rate below zero in 2014, effectively charging banks for parking their excess cash with the central bank overnight. It last cut the rate in March 2016.

To see more graphic on negative yields click on: tmsnrt.rs/2fPTds0 ($1 = 0.9554 euros)

Graphic by Gustavo Cabrera Cervantes, editing by Larry King

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