Business Irish

Saturday 10 December 2016

Banks slashed their Irish bond holding ahead of QE

Published 09/04/2015 | 02:30

QE aims to kickstart the economy by using newly printed cash to buy assets, primarily soveriegn bonds. Photo: Bloomberg
QE aims to kickstart the economy by using newly printed cash to buy assets, primarily soveriegn bonds. Photo: Bloomberg

The amount of Irish government debt held by the Central Bank and other lenders here was cut sharply in February, just ahead of the launch of the ECB's controversial mass bond- buying programme.

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New figures show a €2bn drop in the total holding of government bonds by the Central Bank and other Irish banks in February even as the overall amount of debt increased.

The trend was rapidly reversed however in March when €720m of Irish government bonds were bought on the market as part of the European Central Bank's (ECB's) quantitative easing programme.

QE aims to kickstart the economy by using newly printed cash to buy assets, primarily soveriegn bonds.

Under the ECB's QE structure the bulk of purchases are made by national central banks, including ours, with some bonds bought directly by the ECB in Frankfurt.

The ECB said it reached its target to purchase €60bn of Eurozone bonds in March, including €720m of Irish debt.

That will have reversed some of the previous month's cut in the Central Bank's holding of Government bonds.

Official figures released yesterday show the amount of the bonds held by the Central Bank and other Irish lenders was reduced by €1.737bn in February to €46.1bn, a figure that includes the remainder of the €25bn of Government bonds received by Dame Street under the deal to tear up the former Anglo Irish Bank promissory note.

Under the deal to scrap the so-called "prom note" the Central Bank must reduce that €25bn holding by €500m a year to comply with ECB rules that bar it from funding the State.

The advent of QE means the Central Bank is now also a buyer of Irish sovereign bonds.

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