ECB intends to be ‘significant’ buyer in commercial debt market
The European Central Bank intends to become a major buyer of commercial debt when it enters the market, according to ECB policymaker Francois Villeroy de Galhau.
In an interview with French website Wansquare, Villeroy said the central bank plans to enter the market for commercial paper — a type of short-term unsecured debt issued by corporations — this week.
“We are determined to be an operational, fair and significant actor on the commercial paper market starting this week in order to bring confidence back,” said Villeroy, who is also head of the Bank of France.
“That way, others will be encouraged to come back quickly,” he added.
Villeroy said the central bank intends to buy non-bank corporate commercial paper on both the secondary and primary market, except for public companies.
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The ECB’s latest package of crisis measures opens the way for it to buy debt of less than six months for the first time down to debt as short as one month.
The ECB has introduced a series of emergency measures to limit the economic meltdown caused by the coronavirus pandemic, and have promised to do everything necessary to hold the euro together.
After coming under pressure to bring down borrowing costs for the Eurozone countries hit hardest by the outbreak, such as Italy, the central bank launched a new, dedicated bond-purchase scheme, bringing its planned purchases for this year to €1.1 trillion.
The bond purchases will continue until the “crisis phase” of the epidemic is over, with non-financial commercial paper included for the first time.
“Extraordinary times require extraordinary action,” said ECB President Christine Lagarde last week.
“There are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate.”