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European credit markets on edge as ECB poised to buy 

June 9, 2016

Joel Lewin, Financial Times

For three months there have been warnings to all in Europe’s corporate bond market that sluice gates will soon open to flood it with money from the central bank.

Ahead of Wednesday’s launch of the European Central Bank’s corporate bond-buying programme, however, the investors and strategists who swim in these financial waters remain uncertain and wary about the turbulence ahead.

After the ECB announced in March it would add bonds issued by companies to the securities it buys each month in an attempt to stimulate economic activity, prices for such bonds rose, borrowing costs plummeted and bond issuance surged.

There have already been two record breaking weeks for corporate bond sales in April and May, with issuance of €21.7bn and €19.7bn respectively, both more than double the total for the whole of January, according to Dealogic data.

Bond yields fall as prices rise, and the average yield on euro denominated debt judged investment grade by rating agencies has dropped back below 1 per cent for the first time since April 2015. Read more

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