ECB purchases of Irish bonds fall 45% as limits bite

About €19 billion of Irish government bonds estimated to be held by ECB

The headquarters of the European Central Bank (ECB). Photograph: Reuters

The headquarters of the European Central Bank (ECB). Photograph: Reuters


The European Central Bank bought €547 million of Irish government bonds in January under its quantitative easing (QE)programme, down 45 per cent from its average purchases for much of last year, as restrictions begin to bite.

While the ECB moved in December to extend the lifetime of its QE bond-buying programme by at least nine months to the end of this year, it failed to ease a restriction that it can buy no more than 33 per cent of eligible bonds from a single state and 33 per cent of any individual bond in issue.

“As part of the QE programme, the ECB has now purchased a total of €19 billion of Irish government debt with an average maturity of 9.07 years,” said Ryan McGrath, head of fixed -income strategy at Cantor Fitzgerald on Tuesday. “The overall level of Irish debt is thought to be approaching the 33 per cent upper issuer restriction level and therefore limiting the amount of Irish purchases.”

Mr McGrath estimates that the nominal value of the €547 million of Irish bonds purchased in January at market value was about €511 million, “which is in line with our forecast that Ireland can continue to participate” in the ECB’s programme for the remainder of this year.

The National Treasury Management Agency’s (NTMA) planned sale of as much as €13 billion of new bonds and the Central Bank’s ongoing sale of bonds linked to Anglo Irish Bank’s bailout will give the ECB more headroom to buy Irish bonds this year.

By the end of this week, the NTMA will have sold €5.25 billion of its full-year target.

Meanwhile, the Anglo Irish-related bonds are the result of the Central Bank receiving €25 billion of government securities in 2013 under a complex restructuring of promissory notes used by the State during the crisis to rescue the lender.

As the bonds remain on the Central Bank’s balance sheet, they are part of the calculation of how much Irish government bonds the ECB and Eurosystem hold. The Central Bank sold €3 billion of these bonds last year to the NTMA, which immediately cancelled them.