The European Central Bank may be forced to buy investment grade corporate debt in an expansion of its QE programme, according to M&G fixed income manager Richard Woolnough.
The ECB began buying German and Italian government bonds today as it started its €1.1trn QE programme, causing these yields to fall further still after a sharp rally in recent months. The yields on German 10-year bunds fell 5bps to 0.35% this morning, while Italy's 10-year yields were down 3bps to 1.29%. However, Woolnough (pictured) pointed out the central bank is refusing to buy debt yielding less than its current deposit rate of -0.2%, meaning a further fall in yields may cause it to run out of eligible securities. "At some point, if [the ECB] cannot buy enough bunds, it may hav...
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