ECB's Steinhoff Sale Is Red Flag for Perfect Credit Market

Central bank sells retailer’s bonds after downgrade to junk
Eligibility for ECB purchase program in focus as buying slows

The stars of the European Union (EU) sit on banners flying outside the European Central Bank (ECB) headquarters stands in Frankfurt, Germany, on Thursday, July 20, 2017. Frankfurt has emerged as a winner of the Brexit vote, with Standard Chartered Plc, Nomura Holdings Inc., Sumitomo Mitsui Financial Group Inc. and Daiwa Securities Group Inc. picking the city as their EU hub in recent weeks.Photographer: Krisztian Bocsi/Bloomberg

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By Tom Freke

January 11, 2018 at 9:56 AM UTC

Updated on

January 11, 2018 at 2:29 PM UTC

This article is for subscribers only.

As the European Central Bank starts the new year planning to slash its asset buying in half, it’s a bond sale, not a purchase, that has caught investor attention.

The central bank revealed this week it had disposed of securities of Steinhoff International Holdings NV after the company was downgraded to junk following accounting irregularities. While the ECB can only buy investment-grade bonds, it’s not obligated to sell after such a cut, and its decision to offload the security has drawn attention to the program that’s scooped up 132 billion euros ($157.6 billion) of corporate bonds in less than two years.