ECB to lend more of its bonds to ease market pressure

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FRANKFURT, Nov 10 (Reuters) – The European Central Bank has raised the amount of bonds it can lend out for cash to 250 billion euros to ease market pressure that tends to worsen over the the year, said Isabel Schnabel, Member of the ECB’s Administrative Council. Thursday.

With the ECB sitting on trillions of euros in government debt, market participants often struggle to find well-rated bonds, like those from Germany, that they can borrow and use as collateral in financial transactions.

This has led the ECB to increase the amount of bonds it makes available for lending to alleviate this shortage, which is particularly acute at the end of the year when commercial banks close their doors.

“The Governing Council has raised from today the limit for Eurosystem securities lending against cash collateral from €150 billion to €250 billion,” Schnabel said in a tweet. “This is a precautionary measure to alleviate the scarcity of collateral and support market functioning towards the end of the year.”

Some analysts expect the government bond shortage to ease next year when the ECB begins to trim its bond stack to mop up excess liquidity and fight runaway inflation in the eurozone.

Reporting by Francesco Canepa Editing by Mark Heinrich

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