The European Central Bank has created a pricing divide in the
asset-backed debt market by identifying which bonds will be eligible for
its asset purchase program and which won’t.
The gap between two securities backed by mortgages sold by the same Spanish savings bank is the widest since June, according to data from Markit Group Ltd. That’s because only one of the deals meets central bank President Mario Draghi’s conditions.
“The ABS market has been split in two by the ECB’s announcement of its criteria for asset purchases,” said Tracy Chen, a Philadelphia-based money manager at Brandywine Global Investment Management LLC, which oversees $58 billion of assets. “The difference between the prices on the bonds that are eligible to be bought and those that are not is the widest for a long time, which is creating short-term opportunities for investors.”
The ECB plans to start its purchase program before the end of the year in an attempt to boost economic growth by freeing up banks to lend. About 400 billion euros ($506 billion) of securities, out of a total stock of about 690 billion euros, are eligible for purchases, the central bank’s Vice President Vitor Constancio said this week.
Read more: Draghi Divides Asset-Backed Debt Market Into Haves and Have Nots - Bloomberg
The gap between two securities backed by mortgages sold by the same Spanish savings bank is the widest since June, according to data from Markit Group Ltd. That’s because only one of the deals meets central bank President Mario Draghi’s conditions.
“The ABS market has been split in two by the ECB’s announcement of its criteria for asset purchases,” said Tracy Chen, a Philadelphia-based money manager at Brandywine Global Investment Management LLC, which oversees $58 billion of assets. “The difference between the prices on the bonds that are eligible to be bought and those that are not is the widest for a long time, which is creating short-term opportunities for investors.”
The ECB plans to start its purchase program before the end of the year in an attempt to boost economic growth by freeing up banks to lend. About 400 billion euros ($506 billion) of securities, out of a total stock of about 690 billion euros, are eligible for purchases, the central bank’s Vice President Vitor Constancio said this week.
Read more: Draghi Divides Asset-Backed Debt Market Into Haves and Have Nots - Bloomberg
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