In recent months several European central banks have started to diversify their portfolios, having traditionally bought only government debt. According to one senior banker, those in charge of the portfolios at the Swiss National Bank, for example, are starting to "go off piste", while others are "certainly considering" moving down the credit curve.
Although central banks have long bought triple-A-rated debt from European and US agencies and supranationals, the recent movement down the credit curve to single-A ratings, with their associated risks, is a significant break from the past. Michael Clack, senior managing director of central bank sales at Bear Stearns, says that "some countries may have already invested in lower credits" than single A, with other market sources saying that Switzerland has already established a small credit fund. Clack says: "In general the investments have not gone significantly down the credit curve as yet". However he does not discount the possibility of a move in the near future. So far sources say that no highly structured credit has been used but, again, they feel that such purchases are not far off.
The Banque de France annual report hints at an interest in corporate purchases by noting that the "stabilization of credit markets" is leading to "better than expected corporate earnings".