Woolnough: ECB may cut rates further and buy corporate debt

The European Central Bank may be forced to buy investment grade corporate debt in an expansion of its QE programme, according to M&G fixed income manager Richard Woolnough.

The ECB began buying German and Italian government bonds today as it started its €1.1trn QE programme, causing these yields to fall further still after a sharp rally in recent months. The yields on German 10-year bunds fell 5bps to 0.35% this morning, while Italy's 10-year yields were down 3bps to 1.29%. However, Woolnough (pictured) pointed out the central bank is refusing to buy debt yielding less than its current deposit rate of -0.2%, meaning a further fall in yields may cause it to run out of eligible securities. "At some point, if [the ECB] cannot buy enough bunds, it may hav...