April 4, 2017 / 5:27 PM / 4 months ago

UPDATE 1-Bundesbank loads up on loss-making bonds in March

2 Min Read

* Average maturity of German purchases is 4.7 years in March - IFR

* Germany's five-year bond yields -0.44 pct

* Chart: tmsnrt.rs/2mwLWBd (Writes through)

By Francesco Canepa

FRANKFURT, April 4 (Reuters) - Germany's Bundesbank was forced to buy more loss-making government debt in March to do its part in the European Central Bank's money-printing programme, aimed at boosting inflation in the euro zone, ECB data showed on Tuesday.

The threat of recording losses is likely to exacerbate Germany's impatience with the ECB's 2.3 trillion euros ($2.45 trillion) scheme, due to run at least until the end of the year, and strengthen calls to wind it down as soon as possible.

As the central bank of the euro zone's biggest economy, the Bundesbank accounts for the lion's share of the ECB's purchases but it is already facing the risk of running out of eligible paper to buy.

This is forcing it to purchase short-term bonds that yield less than zero and, in some cases, even less than the ECB's -0.4 percent deposit rate.

This means the Bundesbank is guaranteed to post a loss on those investments that will not be fully compensated by the charge it levies on banks' excess deposits, which grow as a result of the money-printing programme.

Tuesday's data showed the average maturity of German public-sector bonds bought in March was 4.7 years, as this chart by IFR, a Thomson Reuters financial information service, showed: tmsnrt.rs/2mwLWBd

This is a slight increase compared to February but it is half the maturity of its purchases in January, when the Bundesbank was allowed to start buying bonds yielding less than the deposit rate.

The yield on a German government bond with a 5-year maturity is -0.44 percent.

The Bundesbank posted its smallest profit in more than a decade in 2016 after setting aside money against potential losses on the bonds it is buying as part of the scheme. ($1 = 0.9378 euros) (Reporting By Francesco Canepa; Editing by Hugh Lawson)

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