ECB Doubles Pandemic Bond-Buying Program, Investors Watch Europe With Interest

The European Central Bank left interest rates unchanged Thursday, but increased its pandemic bond buying program. 

The ECB Pandemic Emergency Purchase Programme has been increased by 600 billion euros to 1.35 billion euros ($1.52 billion). The horizon for net purchases under the PEPP will be extended to at least the end of June 2021. The maturing principal payments from securities purchased under the PEPP will be reinvested until at least the end of 2022.

'We Were Expecting Less Of An Increase' 

The eurozone has suffered immensely due to the coronavirus pandemic.

“While it is no surprise to see interest rates left untouched, we were expecting less of an increase in the pandemic bond buying programme given economies across Europe are beginning to reopen and the worst of the crisis appears to be in the rear-view mirror,” says Hinesh Patel, portfolio manager at Quilter Investors.

The move should be another positive for risky assets at a time when equities have already rallied strongly from their March lows, the portfolio manager says. 

Investors Watch Europe With Interest

Billionaire George Soros recently said the survival of the EU is challenged and that the coalition may break apart in the wake of the coronavirus pandemic unless the bloc issues perpetual bonds to help weak members such as Italy. Soros said the damage to the eurozone economy will last longer than most people believe.

Investors will be watching Europe going forward, as valuations remain cheaper versus other regions and investments are under-owned by international investors, says Quilter Investors' Patel. 

“If Christine Lagarde continues to placate big businesses’ borrowing costs like this, we should see a positive return environment for investors as the economy gets going again.”

Related Links:

Coronavirus Crisis An Existential Threat To European Union, Says Billionaire Investor, Philanthropist George Soros

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Posted In: ecbEuropean Central BankHinesh PatelQuilter InvestorsNewsEurozoneMarkets