February 5, 2018 / 6:02 PM / in 6 months

ECB increases buying of company debt despite criticism

FRANKFURT (Reuters) - The European Central Bank raised its purchases of company debt in January while slashing its buying of government bonds, ECB data showed on Monday, in a sign that the focus of its huge stimulus programme may be shifting.

FILE PHOTO: The European Central Bank (ECB) headquarters are pictured in Frankfurt, Germany, December 7, 2017. REUTERS/Ralph Orlowski/File Photo

Aimed at lowering borrowing costs for companies, the ECB’s purchases of corporate bonds have been criticised by some European lawmakers for being too risky.

But with the ECB’s 2.55 trillion euros (£2.26 trillion) bond-buying scheme due to run at least until September, Frankfurt was expected to delve more heavily into credit to avoid hitting a cap on how much sovereign debt it can own in Germany.

Data from January, when the ECB started buying bonds at the halved pace of 30 billion euros, showed corporate debt purchases nearly doubled from December to 5.6 billion euros, or 18 percent of the monthly total.

By comparison, purchases of sovereign bonds were cut in half in January to 20.9 billion euros.

Company debt had previously accounted for roughly 10 percent of the monthly total since it was added to the ECB’s shopping list in mid-2016.

New purchases included a bond issued last week by Luxembourg-based Aroundtown, a property firm which mainly invests in German and Dutch commercial real estate.

In a further sign the ECB was wary of breaching a limit on owning more than a third of any country’s national debt, Frankfurt bought fewer bonds from Germany than the rules of its programme dictate, while overbuying in Spain, Belgium, Italy and France.

This was leaving the ECB’s holdings of Italian, French, Belgian and Austrian debt some 5 percent higher than the proportions dictated by their “capital key”, or how much capital their national central banks have paid into the ECB.

Germany was still slightly above its own quota, due to heavy buying at the start of the programme.

ECB President Mario Draghi said last month the stock of bonds held was the only “relevant metric” for assessing the country break-up of the asset-purchase programme.

Reporting By Francesco Canepa; Editing by Hugh Lawson

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