Economists expect junk bonds to be included in ECB bond buying program

US, WASHINGTON (ORDO NEWS) — The European Central Bank (ECB) will start buying more risky bonds and increase the volume of its bond purchase program to protect the eurozone economy from the effects of coronavirus, economists predict. About this writes the Financial Times.

In March, the central bank announced the launch of an emergency bond purchase program (Pandemic Emergency Purchase Program, PEPP) worth 750 billion euros.

The ECB is expected to include more risky bonds in the program – the so-called “fallen angels” who recently lost their investment rating, economists told FT. The regulator is also expected to increase the scope of the PEPP program.

The ECB’s Governing Council will discuss monetary policy options on Thursday. Due to the coronavirus pandemic, the meeting will be teleconferenced for the first time.

Although most economists believe that the ECB will have to expand its bond purchase program, they note that the central bank may refrain from such a move this week.

Investors fear Italy’s bonds could become the largest “fallen angel” if it loses its investment credit rating due to concerns about the recession and rising public debt.

Earlier, the ECB decided to pledge bonds with a “junk” rating as collateral for loans. This measure will not concern securities for which the rating decline occurred after April 7th.


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