Markets expect higher ECB purchases of private debt

The European Central Bank (ECB) is expected to announce on Thursday that it is pushing its deposit rate further into negative territory and that it is increasing its buybacks of corporate bonds, according to the consensus emerging on the markets. The deposit rate would drop by 10 basis points to -0.6% and the share of private debts in the monthly purchases of the issuing institute would increase in a proportion that remains to be defined.

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The ECB buys 20 billion euros in assets each month, mainly public sector debt. Since 2016, part of this program, called CSPP (Corporate sector purchase program), has focused on corporate debt. In January, these purchases of corporate bonds represented 5.74 billion euros, or just over a quarter of the total, according to ECB data.

" The market consensus for the ECB is a 10 basis point drop in the deposit rate and an increase in the corporate debt repurchase program (CSPP), " said Vincent Marioni, director of credit investment Europe at Allianz GI, to Reuters Monday, three days before the monetary policy meeting of the Governing Council of the central bank.

It remains to be seen whether the ECB will increase the overall amount of these purchases or simply the CSPP's share. ECB President Christine Lagarde hinted that her preference was for targeted measures, but the markets cannot be satisfied with it since they now assess 100% the probability that the Frankfurt institution will announce a drop on Thursday. at least ten points from its deposit rate.

They are now betting on three rate cuts in total by October, against two last week according to the " ECB Watch " barometer.

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The ECB is stepping on eggs after an emergency announcement last Tuesday by the Federal Reserve of a rate cut of 50 basis points, without waiting for its monetary meeting of March 17 and 18. This was followed by a further fall in the equity markets and the collapse of bond yields.

A simple correction, logical at the end of the cycle with tight valuations, did not justify the Fed acting in this way, believes Franck Dixmier, director of bond management at Allianz GI.