ECB Announces 750 Billion Euro Pandemic Bond-Buying Program
- Decision taken in emergency meeting Wednesday evening
- Policy makers will consider raising self-imposed QE limits
The decision in an unscheduled meeting on Wednesday evening came less than a week after a policy session in which officials agreed to pump more liquidity into the financial system. Despite that step and stronger measures by other central banks, markets are in freefall, prompting a new set of measures.
- A temporary asset purchase program to buy public and private-sector securities, worth 750 billion euros and running until at least the end of 2020
- Program will cover all assets eligible under current quantitative-easing program, and will be extended to commercial papers of sufficient credit quality
- Greek government debt will be included in the program under a waiver from current rules
- Collateral standards will be eased by adjusting some risk parameters
- Program will continue until ECB judges the crisis phase of the pandemic to be over, but not before the end of this year
- The ECB will consider raising its self-imposed limits on QE holdings, and stands ready to increase the size of its asset purchase programs
The euro and U.S. equity futures rose after the stimulus measures. S&P 500 futures reversed losses and the single currency edged higher to trade around $1.0950.
Investors are pushing up bond yields as they fret about the cost of the massive fiscal response to the pandemic. Italy, which already has the euro zone’s second-biggest debt burden after Greece and is the worst-affected by the disease, is especially hard hit.
ECB President Christine Lagarde inadvertently worsened the problem last week when she said the central bank’s job is not to close the spreads between safer and riskier government debt yields.
In its statement, the central bank said it “will not tolerate any risks to the smooth transmission of its monetary policy in all jurisdictions of the euro area.”