ECB speeds up purchase of corporate bonds

To the astonishment of most of the analysts, the European Central Bank (ECB) has ramped up its purchase of corporate bonds under its quantitative easing program. Since July, European Central Bank (ECB) has on an average purchased around €1.5 billion worth of corporate debt securities. But in the last two weeks, the ECB has purchased more than €5 billion worth of corporate debt. So far the ECB has purchased a little more than €25 billion worth of corporate debt. Last week, ECB bought, €2.657 billion, second highest since the purchases began in June.

While the purchases have been very successful in bringing down the cost of funding for the companies, the package (negative interest rates, purchase of government bonds, purchase of corporate bonds) has so far failed to trigger the inflation. While the average corporate yields have dropped to a record low of 0.57 percent this month, the bond market is pricing a decade-long deflationary environment.