Markets got their first glimpse on Tuesday, June 2, of just what the European Central Bank has been so busy buying in its Pandemic Emergency Purchase Programme (PEPP), a €750 billion scheme set up by the ECB in March to help maintain monetary policy transmission in the face of the economic chaos caused by government responses to the coronavirus pandemic.
While most purchases so far are of sovereign debt, as expected, the striking finding is that most of the private sector debt that the bank bought – some 76% of the €46 billion total in that segment – was in the commercial paper (CP) market. Within that, some 81% – a total of €28.7 billion – was primary issuance.
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It was in CP where some of the earliest corporate funding pain was felt as liquidity began to dry up in the middle of March, a factor that led to companies quickly drawing on their bank lines to refinance paper that could not be rolled over, as well as to provide additional working capital.
That pressure began to ease as stimulus measures kicked in – including the ECB's PEPP, which expanded on existing measures like the asset purchase programme (APP) and the corporate sector purchase programme (CSPP).
