The actions of European Central Bank (ECB) to save the eurozone economy scared away those who want to make money on debt instruments of the continent: both private and institutional investors investing in government bonds of different countries, writes Bloomberg a>.
By the end of next year, the ECB’s share of German government bonds, which serve as a benchmark (benchmark) for European debt securities, will reach 43 percent – 30 percent at the end of 2019. The share of ownership of the Italian national debt will be 40 percent (against 25 percent in December last year).
This means that there are fewer opportunities for other investors to invest in the most reliable instruments on the European market. Some of them are already preparing to switch to other types of assets. Among them is the investment arm of one of the world’s largest insurance companies, the French AXA Group.
The situation was a consequence of the ECB’s policy to support the crisis-hit European economy. As part of the quantitative easing program, the regulator buys government and corporate bonds from banks, providing the banking sector with additional liquidity and lowering the level of market rates. On December 10, the expansion and extension of the program was announced. By March 2022, the ECB will buy securities for 1.85 trillion euros.
The current situation is already called the Japaneseization of the European economy. In Japan, the overwhelming majority of government securities belongs to one owner – the local Central Bank , which coupled with low rates makes the market unattractive for outside investors.