ECB’s Steinhoff sale is a red flag for perfect credit market
The offloading of Steinhoff bonds ‘steepened the cliff between in and out’ as the European Central Bank prepares to slash its asset buying in half
London — As the European Central Bank (ECB) starts the new year planning to slash its asset buying in half, it is a bond sale, not a purchase, that has caught investor attention. The central bank revealed this week it had disposed of securities of Steinhoff International Holdings after the company was downgraded to junk following accounting irregularities. While the ECB can buy only investment-grade bonds, it is not obligated to sell after such a cut, and its decision to offload the security has drawn attention to the programme that has scooped up €132bn of corporate bonds in less than two years. "We think it ought to make investors a little more cautious regarding cuspy eligible names," Joseph Faith, a credit strategist at Citigroup in London, wrote in a January 9 note. "In a world where almost all eligible bonds are priced to perfection, the Steinhoff sale has steepened the cliff between ‘in’ and ‘out’." ECB purchases have boosted corporate credit across all ratings, eligible or n...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.