The Slovenia Times

Banka Slovenije to Be Able to Buy 300M Bonds a Month


The amount of bonds each central bank will be able to purchase will depend on their share in the ECB's capital.

But the allocation key needs to take into account that capital into the ECB has also been paid in by EU member states that have not (yet) adopted the single currency.

Eurozone members have paid in over EUR 7.6bn, of which Banka Slovenije contributed EUR 37.4m or 0.49%.

The ECB announced yesterday it will buy EUR 60bn worth of bonds a month from March this year and at least until September 2016, or a total of at least 1.14 trillion euros.

Calculated for Slovenia, the country's central bank will be able to buy up to EUR 294m a month, as a member of the system of eurozone central banks.

It is expected that most of the money will be used for purchases of sovereign bonds. This is the only way to place enough liquidity into the market to bolster demand and raise inflation to the desired 2% level. The main condition is that their credit rating is safe.

Private debt will qualify only when it has collateral. Banka Slovenije said today it would have the ability to buy bonds from all parties, but expects most of the buying to involve state bonds.

While liquidity in Slovenia is currently sufficient, many economists have highlighted that meeting lending criteria is a bigger problem for companies and households. This is why some expressed doubts that the quantitative easing programme will not be overly effective.

But the country's biggest commercial bank, NLB, said it expected the measure to provide a boost to growth and inflation outlooks. It added that it would be among the banks tapping into the mechanism by selling bonds in its portfolio of assets.

A similar sentiment was echoed by Abanka, the country's third-largest bank, which is also state-owned.

The ECB's decision has further reduced the yields on the bonds of euro countries with Slovenia recording one of the biggest falls.

The yield on the Slovenian ten-year bonds fell 44 basis points on MTS electronic exchange today to 1.47%, a new all-time low. The spread to the German benchmark bond fell to 115 basis points.


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