The European Central Bank added corporate bonds to its shopping list Wednesday in what the chief economist of Deutsche Bank, David Folkerts-Landau, called an “act of desperation.”
The bank has focused on purchasing government bonds since it launched the controversial program bond-buying in March 2015 to increase inflation and spur economic growth in the euro zone.
Savers, banks and German policy makers such as Finance Minister Wolfgang Schäuble have voiced mounting criticism of the European Central Bank’s money printing and ultra-low interest rates, complaining that it’s hurting savings and retirement provisions, that it’s piling up risks in the German central bank’s balance sheet, and that it isn’t working.
Dealers said the ECB bought bonds of European blue chips including Spain’s Telefonica and Telecom Italia, power companies RWE of Germany and Engie of France, brewing giant Anheuser Busch Inbev, French automaker Renault, German industrial group Siemens and Italian insurer Generali.
The European Central Bank in April increased the volume of its monthly asset purchases to €80 billion from €60 billion. So far it has been buying government bonds as well as the debt of national and international development banks, Pfandbrief covered bonds and asset-backed securities.
The exact amount of corporate bonds purchased will be disclosed in the coming weeks. Many investors expect it to amount to between €3 and €5 billion, or even up to €10 billion, per month. But the initial volumes could be lower.
The bank is allowed to purchase euro-denominated bonds issued by companies whose debt has been assigned an investment-grade rating by at least one rating agency.
The 10 European companies with the biggest volume of outstanding bonds include four from Germany: Deutsche Telekom and the three automakers VW, BMW and Daimler.