ECB slows asset purchases as policymakers weigh test

The European Central Bank slowed asset purchases last week, underlining the challenge for policymakers trying to expand the institution’s balance sheet. 

The ECB settled €233m of asset-backed-securities purchases in the week ended December 5, after spending €368m the first week of the programme.

The Frankfurt-based central bank also bought €3.126bn of covered bonds, down from €5.078bn the previous week. ECB president Mario Draghi has held out the prospect of yet more stimulus to boost the balance sheet when policymakers review current measures early next year.The ECB is preparing broad-based asset purchases, including government bonds, with any decision at its January 22 meeting linked to incoming information, two officials said.

A key piece of data for policymakers’ deliberations will be demanded this week for a second-round of long-term loans aimed at boosting credit to the real economy. Since the ECB started asset purchases in October, it has spent €21.528bn.

It bought €20.927bn of covered bonds and €601m of asset-backed securities. Draghi said last week one reason why the securities purchases have been muted is because the programme started at the end of the year.

December was among the three worst sales months in every year from 2010 to 2013, and new issues of the debt this month are on course for the second-lowest total of 2014, says JPMorgan Chase.

“Draghi indicated the ECB is not willing to crowd out other investors, and in asset-backed securities in particular, the programme is also designed to revitalise the market,” said Rabobank analyst Ruben Van Leeuwen in Utrecht, the Netherlands, yesterday.