martes, 7 de julio de 2015

martes, julio 07, 2015

ECB Dips Toe in Corporate Bond Pool

Bonds of Italy’s Enel are on the ECB’s shopping list, but this doesn’t preface mass corporate-bond buying

By Richard Barley

July 2, 2015 11:45 a.m. ET

President of European Central Bank Mario Draghi. Bonds of Italy’s Enel are on the ECB’s shopping list, but investors shouldn’t assume this prefaces mass corporate-bond buying.President of European Central Bank Mario Draghi. Bonds of Italy’s Enel are on the ECB’s shopping list, but investors shouldn’t assume this prefaces mass corporate-bond buying. Photo: Associated Press


What’s in a name? Quite a lot, it seems, if it turns up on the list of issuers eligible for European Central Bank bond purchases.

The ECB raised eyebrows Thursday as it added 13 new borrowers to its quantitative-easing program. Alongside government bonds, the ECB is also buying securities from selected other issuers, including so-called agencies. These are typically state-owned issuers fulfilling a public-sector role like German state development bank Kreditanstalt fuer Wiederaufbau, and CADES, responsible for financing France’s social security system.

But the new borrowers, ranging from French rail group SNCF Reseau to Austrian motorway operator Asfinag, have a distinctly corporate flavor, even if they are wholly or partially state-owned. That is especially true of Enel ENEL -1.26 % SpA, the global energy company in which Italy has a 25.5% stake.

Markets class Enel as a straight corporate borrower; it doesn’t even make Barclays BCS 0.06 % ’ government-related issuers bond index. The market rushed to two judgments: first that this could be the precursor to a further expansion of ECB purchases; and second, that this was a response from the ECB to tensions around Greece.

 
The ECB has given itself plenty of leeway on purchases. The official decision on quantitative easing says only that an agency “means an entity that the Eurosystem has classified as such for the purpose of the [public-sector purchase program].”

Investors should be wary, though, of assuming corporate bonds in general are fair game. In December, at least, ECB executive board member Peter Praet played down the prospect of corporate purchases, citing the relatively small size of the market. The list of agencies previously was heavily focused on Northern Europe and Germany: at least in part, Thursday’s additions mark a geographical diversification.

Meanwhile, the idea that this is a response to Greece also bears examining. Markets have been remarkably well-behaved, even as the relationship between Greece and its creditors has broken down. While the ECB has offered verbal assurances, it hasn’t actually needed to do anything yet. Adding a few names to the purchase list is action, especially coming just days before the Greek referendum on creditors’ proposals, but it is of a very limited kind.

For markets, perception and signaling matters: hopes of expanded purchases are likely to persist, especially because Enel has made the cut. In that regard, the ECB has to be careful it doesn’t step out onto the proverbial slippery slope.

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