* France among beneficiaries; Portugal left behind
* Corporate debt buying causing "distortions": BofA-ML
By Francesco Canepa
FRANKFURT, March 6 The European Central Bank
slowed its purchases of Portuguese government debt to a new low
in February, just as the nation's borrowing costs hit a
three-year high on the debt market.
By contrast, the ECB bought disproportionately more debt
last month from bigger economies Germany, France and Italy.
French government bond yields have risen due to worries about
the ascent of a eurosceptic candidate in the campaign for May's
Euro zone central banks are buying 80 billion euros ($85
billion) worth of mostly sovereign debt every month, pumping
money into the economy to revive euro zone inflation.
But they are already starting to run again constraints in
small economies such as such as Estonia and Finland, and in
countries such as Portugal where the ECB had already bought debt
during the financial crisis.
The ECB bought just 656 million euros worth of Portuguese
bonds last month, or a third of what its rules dictate, to avoid
nearing a self-imposed bar on it owning more than a third of any
While the pace of buying will be cut by a quarter from next
month, some worry this limit will make it hard for the ECB to
extend its quantitative easing (QE) scheme beyond December or
help a country in distress via its Outright Monetary
"This could not only restrain the scope for further QE
extensions in 2018, but might entail ramifications for the OMT
scheme," analysts at Allianz Global Investors wrote.
"Therefore, the ECB will possibly further reduce the pace of
purchases for smaller countries such as Portugal and Finland."
The ECB is expected to keep its policy on hold on Thursday
despite rising inflation and signs of shortage on the debt
The Frankfurt-based central bank slightly slowed its
purchases of company bonds last month, just as worries grew that
it was helping to fuel a bubble in parts of that market.
The ECB bought 7.8 billion euros worth of corporate debt in
February, the lowest figure since last summer if December, when
the ECB's money-printing programme was suspended during the
Christmas break, is taken out.
The ECB has bought nearly 70 billion euros worth of
corporate bonds since June, much more than many in the market
This has pushed the yields on debt issued by some
highly-rated companies such as German conglomerate Siemens
below that of a highly-rated government bond.
"In periods of euro zone political uncertainty, the onus
falls on the ECB to continue with policies such as QE to stem
euro zone 'fragmentation' risks," analysts at investment bank
"And yet, policy uncertainty and central bank intervention
have precisely acted as a powerful cocktail lately, creating
further distortions in the euro credit market."
($1 = 0.9447 euros)
(Reporting by Francesco Canepa; Editing by Ruth Pitchford)