ECB begins its Corporate Sector Purchase Programme

The ECB has today begun their Corporate Sector Purchase Programme (CSPP), whereby they will be buying investment grade Euro-denominated bonds issued by non-bank corporations. While it is not known exactly what bonds the ECB will be buying, analysts have speculated that the focus will fall initially on utilities, which account for the largest proportion of the market. They have also estimated that the ECB will likely purchase roughly 3bn-10bn Euros per month. This is significant, as it represents genuine support for Euro bonds and is of a scale similar to that of the US when they undertook their QE programme. After the announcement, the Euro corporate bond market rallied and average yields fell back below 1 per cent. The Euro also strengthened against both Sterling and the US Dollar. We expect that this fall in yields is likely to continue over the coming weeks.