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Report: Ireland to comply with ECB QE rules, cut bond purchases by 50%


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Report: Ireland to comply with ECB QE rules, cut bond purchases by 50%

The Central Bank of Ireland may slash monthly bond purchases by 50% to €400 million, The Irish Times reported Dec. 8.

This follows the European Central Bank's extension of its quantitative easing program to December 2017 and the reduction of its monthly bond purchase limit to €60 billion.

After the announcement, the yield on Ireland's benchmark 10-year bonds rose to 1%, Reuters reported Dec. 9.

It was thought the Central Bank of Ireland would have to halt bond-buying by March 2017, because at the current rate it could violate the limits of country and individual debt that can be bought under the quantitative easing program, Reuters reported citing Société Générale and Cantor Fitzgerald.

However, a spokesperson for the Central Bank of Ireland said the bank will "manage the implementation of the purchase program carefully, so that the impact of the program parameters or any changes in these parameters would be as smooth as possible."

According to Ryan McGrath, Cantor Fitzgerald's head of fixed income strategy in Dublin, Ireland's National Treasury Management Agency could help the central bank ease restrictions through an expected multibillion-euro bond sale in 2017. It could also sell €9 billion of new bonds in the first half of 2017 and buy back €2 billion of bonds from the central bank, The Irish Times reported.

The Central Bank of Ireland could also work around the problem by swapping legacy floating-rate debt, related to the bailout of Anglo Irish Bank, for new bonds eligible for ECB purchase.