- REUTERS/Ralph Orlowski
The European Central Bank is reportedly thinking about buying municipal debt as part of its massive quantitative easing plan.
According to a report from Reuters, the ECB is thinking about buying debt from municipalities and regions in the eurozone, expanding the scope of its asset purchase program beyond sovereign debt.
Following this report, the euro was little changed, trading near $1.074 to the dollar.
Last month, ECB president Mario Draghi hinted that more QE was coming from the ECB, which is currently buying €60 billion worth of assets each month until at least next September.
Following Draghi’s hints, Peter Praet, the ECB’s chief economist, said that there were “no taboos” in terms of what the bank could and could not consider buying as part of its program.
With this report, it seems that buying debt from smaller entities like cities and regions is now part of the ECB’s discussion. This additional expansion from the ECB into buying municipal-level debt wouldn’t be likely until March, according to Reuters.
And as Reuters notes, the big winner could be Germany:
A second person confirmed that buying municipal or regional bonds already being traded was one of the options being studied, also a testimony to the fact that the ECB’s alternatives are limited.
Any move to buy municipal debt would particularly benefit the German regions that have sold hundreds of billions of euros of bonds and dominate the market, making it even cheaper for them to borrow.
But it could also help rejuvenate slack markets such as Italy or Spain although regional borrowings count in calculating a country’s overall debt pile and their size is therefore also kept in check.
Time and again, Business Insider’s Mike Bird has characterized the ECB’s foreshadowing of additional asset purchases as the bank and its officials “loading the QE bazooka.”
And so here we are.