The ECB announced tonight that it is launching (after last week‘s disappointing meeting) a “pandemic bond purchase programme” for 750 billion Euros. It is called the “Pandemic Emergency Purchase Programme” (PEPP). This volume is to be additionally pumped into the bond market until the end of 2020. Private and government bonds are to be purchased. This programme is intended to counter the economic effects of the coronavirus. Exceptional times require exceptional action! This is what ECB boss Christine Lagarde is currently tweeting about. The ECB is determined to exploit the full potential of its tools.
Interestingly, the ECB also says that for purchases under this PEPP there will be a waiver of the admission requirements for bonds issued by the Greek government.
ECB with further measures
WE could almost miss it. In this announcement about the new 750 billion Euro bond purchase program, the ECB adds further measures. In order to broaden the range of corporate bond (CSPP) purchases to date, the assets eligible under the programme will be extended to non-financial commercial paper (treasury bills). All commercial paper with sufficient creditworthiness will be eligible for purchase under the CSPP.
And they relax their own collateral requirements by adjusting the main risk parameters of the collateral framework. In particular, the scope of application of additional credit claims (ACC) will be extended to claims related to the financing of the corporate sector. This would ensure that counterparties could continue to benefit fully from the Eurosystem’s refinancing operations. In further remarks, the ECB currently made it clear that it would do everything necessary within the “framework of its mandate”. It is prepared to buy more bonds, etc.