The ECB will abruptly reduce gross purchases of corporate debt from July, from a monthly average of €8 billion of gross purchases in the first five months of 2022 to just €1.8 billion for reinvestments.
With the ECB’s announcement yesterday of the end of net APP purchases as of July, a six-year period of corporate QE comes to an end (since 2016 and with the exception of 2019) and has involved the purchase of corporate debt for a total of €383 billion (€341 billion through the CSPP and €42 billion through the PEPP), i.e. around 30% of the outstanding amount of eligible debt.
In the case of the CSPP, c.24% of this €341mm has been purchased through the primary market, which shows the importance that this programme has had in both the primary and secondary European credit market up to the present time. This past week we learned the purchase figures for the month of May, where we saw that the ECB has maintained its important support in corporate credit, with €5.4 billion of net purchases, practically the same figure as in April (€5.5 billion) and despite the drop in total APP purchases from €40 billion in April to €30 billion in May.
Meanwhile, the majority of corporate issuance in May was CSPP-eligible debt: €21 billion, 61% of the total €35 billion; while, in net terms, eligible issuance was €12.6 billion, just over double the €5.4 billion of net ECB purchases, which is evidence of the significant support that the CSPP continues to exert in the credit market.
This ECB support is also evident in the secondary market, where eligible corporate debt maintains a significant discount to its non-eligible counterpart of 16bp (58bp vs. 74bp respectively), while this discount was only 3bp in February 2020, before the outbreak of the pandemic.
