
This Might Be the Biggest Problem With the ECB’s Plan to Buy Corporate Bond Debt – Bloomberg
April 28, 2016 \
9 Comments
Full Article: Bloomberg
As the ECB can own 70% of any corporate bond issue, any signs of deterioration in a given company’s credit profile could spark severe dislocations in the market for its debt.
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9 Comments on "This Might Be the Biggest Problem With the ECB’s Plan to Buy Corporate Bond Debt – Bloomberg "
The ECB is now printing money to fund corporates, with its simultaneous QE and corporate bond purchases.
This is intellectually and morally bankrupt but the corollary of 8 years of Western central bank policy.
The article’s points about idiosyncratic credit events causing central bank selling are the immediate story. The real story is that the realization of the start of this post, i.e. this is beginning of the end for New Normal. As JP Morgan rightly said after 1907, banking is about confidence. The ECB is excessively stretching incredulity.
Wolfman nailed it……’we will do whatever is necessary’ is a pretty bold statement and when it was first made the market felt safe. A few years on and it just sounds like the best known quote of a fading movie star.
I wonder what happens when the ECB has to sell (irrespective of an event). Anyone have an idea of who is going to step in?
There is no one to buy if the ECB sells. This was my point. Beyond the moral hazard of printing money to buy corporates no one else can compete.
Funny when BUBA did this for Covered Bonds all hailed this initiative alas BUBA struggled to find secondary market liquidity, pricing & thus struggled to achieve what they set out to help. THey approached several platforms to get more secondary trading, but none of the banks wanted to play.
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