European Central Bank Details Covered Bond Plan

The European Central Bank has released some details of its plan to purchase euro-denominated covered bonds, including those backed by mortgages. The ECB said that it plans to start the purchases in July and have the program "fully implemented" by the end of June 2010 at the latest. The central bank also said that the purchases would total 60 billion euros ($85 billion) and "will be distributed across the euro area and will be carried out by means of direct purchases" conducted in both the primary and secondary markets. Covered bonds eligible for purchase must, among other things, meet eligibility requirements for Eurosystem credit operations collateral. They also must have an issue volume of about 500 million euros ($708 million) or more or, in any case, a volume no lower than 100 million euros ($142 million). In addition, they must have a minimum rating of AA or an equivalent rating from Fitch, Moody's, Standard & Poor's or DBRS or, in any case, a rating no lower than the lowest investment grade ratings of BBB- or Baa3.