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ECB Assets Rise Above 36 percent Of Eurozone GDP; Draghi Now Owns 10.2 percent Of European Corporate Bonds

The ECB’s nationalization of the European corporate bond sector continues. In the ECB’s latest update, the six central banks acting on behalf of the Euro system provided an update on the list of corporate bonds they bought. They bought into 810 issuances with a total of €573bn in amount outstanding. For the week ending 27th January, the bond purchases stood at €1.9bn across sectors. This increases the number of securities held by the ECB to 813, and lift the ECB’s total corporate bond holdings to €58.82b, which means that as of the latest weekly data, the ECB now owns 10.2% of the total €575.42BN in European corporate debt outstanding.

Since one month ago, the ECB owned 9.2% of the corporate bond market, the rate of nationalization of the private, outstanding corporate bonds is roughly 1% per month. Tangentially, 52 or 6.4% of the 813 securities held by the ECB are negative yielding.

Which corporate bonds did Mario Draghi generously subsidize this week? According to the ECB’s holdings, utilities remain the largest industry group with 215 securities, while according to Bloomberg, in the latest week  the ECB bought bonds issued by Atlantia, BASF, Carmila, Enel, Fresenius, Italgas, LEG Immobilien, Linde, Legrand, RTE, Snam and Telefonica Emisiones. The complete list of ECB holdings by ISINs can be found here.

While there was some market concern in December that the ECB may be tapering its CSPP program, when it purchased just €4 billion in corporate bonds in the month, less than half the recent runrate from the September-November period, this appears to have been calendar driven, as in January the ECB is back to its aggressively purchases and through the last week, it purchased €7.8 billion in corporate bonds for January, nearly a 100% increase from the prior month.

ECB Corporate Sector

ECB Corporate Sector

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Corporate purchases began on June 8, 2016, with the weekly average of ~€1.7bn per week and total corporate bond holdings of €58.8bn (as of 27-Jan-17), or roughly €6.8bn a month. ECB purchased bonds have gained 0.60% in Dec vs -1.25% in Nov. The bonds purchased under CSPP have marginally outperformed the broad index that gained 0.57% in December. Last week, total EUR issuances worth €21.2bn were issued in the primary market, of which ~ €5.2bn were CSPP eligible. For the month ending December, total CSPP holdings stood at €51.1bn, with 86% of the purchased amount coming from the secondary market.

A breakdown of which countries’ bonds the ECB bought into:

Looking at the break up country wise, French and German issuers continue to dominate the ISIN count (417 issuances worth €309bn in amount outstanding). Bonds from non- Eurozone corporates were also on the list, with the bulk from Switzerland (25 issuances worth €18bn).

ECB Country and sectors

ECB Country and sectors

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When looking at the purchases by sector, Utilities remains at the top (215 issuances worth €143bn), while non-cyclical consumer is a distant second (118 issuances, €91bn in amount outstanding).

Bonds purchased by country and sectors

Bonds purchased by country and sectors

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Mostly belly of the curve, not averse to negative yields

In terms of duration, while the ECB has bought across the curve, it has avoided going very long (12+yr). Bulk of the purchases has occurred in 3-7yrs region (349 issuances worth €242bn). By rating, it’s clear that the ECB hasn’t been reluctant from taking credit risk as they have bought into overall 185 BB rated and non-rated bonds. By yield, the ECB has already bought into 96 negative yielding bonds (€75bn, average yield of – 0.09%). By issuer, the ECB has bought into 810 bonds from 233 issuing entities. The bond with the longest maturity that was purchased was the 20 year EDF 1.875% 13/10/36 from the Electricite De France.

Breakdown by maturity and ratings

Breakdown by country of risk, by sector, by maturity, by ratings; Number of bonds purchased by country of risk, by sector

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Finally, stepping back from just the CSPP program, as of the latest week, total purchases under the ECB’s various asset purchase programmes rose to €1,610 billion…

ECB total purchases

ECB total purchases

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… bring the ECB’s balance sheet to over €3.72 trillion, or over 36% of the total Eurozone GDP.

ECB Balance Sheet

ECB Balance Sheet

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Full story here
Tyler Durden
ZeroHedges' Tyler Durden is the hero of Fight Club, the 1999 movie based on Chuck Palahniuk's novel that reflected Chuck's experience in the Cacophony Society Quote: "Goddamn it, an entire generation pumping gas, waiting tables, slaves with white collars. Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don’t need. We’re the middle children of history, man. No purpose or place. We have no Great War. No Great Depression. Our Great War’s a spiritual war… our Great Depression is our lives. We’ve all been raised on television to believe that one day we’d all be millionaires, and movie gods, and rock stars. But we won’t. And we’re slowly learning that fact. And we’re very, very pissed off." --> see more about Tyler on snbchf
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