Nearly half of ECB's bond holdings from Italy

Thursday 21 February 2013 17.25
ECB holds bonds with a total value face of €218 billion
ECB holds bonds with a total value face of €218 billion

The European Central Bank has said that it holds Irish bonds worth €14.2m.

The ECB also said today that Italian government bonds account for nearly half of its total holdings under a bond-buying programme that it launched in 2010.

The ECB today detailed for the first time what countries' bonds it acquired under the so-called Securities Markets Programme.

This was started when the euro area's debt crisis first flared in May 2010 and formally ended last September.

The bank holds bonds with a face value of €218 billion - €102.8 billion of them from Italy.

Spain accounted for the second-biggest holding, with bonds nominally worth €44.3 billion.

The ECB also holds Greek bonds with a face value of €33.9 billion and Portuguese bonds to the tune of €22.8 billion.

The programme was aimed at easing the euro zone's crisis over too much government debt in some countries.

It sought to lower bond-market borrowing costs for indebted countries so that they were more in line with the ECB's low benchmark interest rates.

But the programme failed to convincingly keep the rates down, so the ECB halted it last year and replaced it with a new, bolder programme.

The ECB has in the past said how many bonds it bought overall in any given week, but it never revealed what countries' bonds it bought and in what specific amounts.

It is revealing that information now as part of a transparency policy meant to increase confidence in its new bond-buying programme, dubbed Outright Market Transactions.

Under the new programme, the bank will only buy a country's bonds in the open market if that country enters into a formal agreement with the euro zone bailout fund to curb its deficits and debt.

Buying bonds raises their price and lowers their interest yield, which reflects a country's borrowing costs. That is because price and yield move in opposite directions.

No bonds have been bought under the new OMT programme, but its mere existence has helped lower borrowing rates for indebted governments and calm fears a country such as Spain or Italy might default on its debts.

The ECB also said today that it increased its net profit by 37% to €998m last year. It said stronger interest earnings on its holdings and investments helped improve the result.

The money is handed over to national central banks, who in turn can hand any profits back to their national governments.

The ECB made €555m on its holdings of Greek bonds - money that euro zone governments have agreed could be applied to lower Greece's debt load.