Tuesday 27 September 2016

ECB to buy €645m in Irish and Dutch mortgage bonds

Alastair Marsh

Published 06/09/2015 | 02:30

ECB president Mario Draghi
ECB president Mario Draghi

The European Central Bank is seeking to acquire as much as €645m in Irish and Dutch mortgage bonds as it increases efforts to buy asset-backed securities, according to three people familiar with the matter.

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The central bank is asking investors to sell their holdings in 15 residential mortgage-backed securities, including bonds backed by loans originated by units of Permanent TSB Group Holdings PLC and Dutch insurer Aegon NV, said the people, who asked not to be identified because they're not authorised to talk about it.

The Frankfurt-based central bank is seeking to inject new energy into its purchase programme for asset-backed debt after facing criticism from investors and traders disappointed by its reach.

Since June, the central bank has widened its scope to target investor holdings, rather than just buying notes directly from banks, people familiar with the matter said last week. An ECB spokesman declined to comment on the ABS purchase programme.

The ECB has acquired €11.1bn of asset-backed debt under a purchase programme it started in November, equal to just 10pc of its purchases of covered bonds under a similar programme. The volume of its ABS acquisitions has been hindered by an approval process taking as long as five days.

Last week, ECB president Mario Draghi unveiled a revamp of quantitative easing and signalled that officials might expand stimulus if the rout in financial markets continues to weigh on growth and inflation.

Mr Draghi said the Governing Council raised the share of bonds the ECB can buy to 33pc of each issue from 25pc and that policy makers were ready to make more adjustments to ensure the full implementation of the €1.1trn. A weaker global outlook prompted an across-the-board reduction of the institution's growth and consumer-price forecasts through 2017.

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