ECB steps up government debt buys to keep stimulus going

FRANKFURT (Reuters) - The European Central Bank raised its purchases of government bonds in June to their highest level this year to keep its stimulus program rolling even as chunks of its other assets expired, data showed on Tuesday.

The ECB bought 24.2 billion euro ($28.21 billion) worth of government debt last month, taking its monthly purchases to 31.2 billion euros once company debt, covered bonds and asset-backed securities are included.

The money-printing scheme, aimed at boosting inflation in the euro zone, is set to stop at the of the year, when the ECB will have acquired a total of 2.6 trillion euros worth of assets.

But the central bank will continue rolling over its holdings, with sources telling Reuters last month that government bonds will remain the main focus of its efforts to keep long-term borrowing costs low in the euro zone.

By contrast, purchases of covered bonds dwindled in June to their lowest levels since the ECB started buying them in 2014, coming in at just 683 million euro once matured paper is taken out.

In terms of country, Reuters calculations showed the ECB bought some 185 million euro more of Spanish sovereign debt than implied under the rules of the scheme based on the size of each country's economy. On the other hand, it under-bought French and Italian government debt to the tune of 120 million euro and 100 million euro, respectively.

But these deviations were small when compared to the ECB's multi-billion holdings of those countries' bonds, which have generally been overbought since the program started in 2015.

(Reporting by Francesco Canepa; Editing by Peter Graff)

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