ECB starts buying covered bonds in latest stimulus effort

PanARMENIAN.Net - The European Central Bank has started buying securities called covered bonds as it launches its latest stimulus effort aimed at preventing the 18-country eurozone economy from sinking back into recession.

An ECB spokeswoman confirmed the purchases began Monday, Oct 20, according to the Associated Press.

Covered bonds are investments backed by loans such as mortgages. They carry extra protections for investors, which sets them apart from other such asset-backed bonds made from bundled loans.

The ECB is buying them to encourage banks to make the underlying loans. The idea is to get more credit moving to businesses in a eurozone economy that didn't grow at all in the second quarter.

The ECB stimulus efforts also include offers of extra-cheap loans to banks, based on how much they are lending to companies.