European Central Bank (ECB) President Jean-Claude Trichet announced Thursday that the bank would begin its program to purchase covered bonds in July. The program is expected to be fully implemented by June 2010 at the latest.

Under the program, the ECB will make €60 billion ($85.1 billion) worth of direct purchases across Europe in both the primary and secondary markets.

To qualify under the new program, the covered bonds must be eligible for use as collateral for the Eurosystem credit operations and have an issue volume of about €500 million or more and, in any case, not lower than €100 million.

The bond must also have been given a minimum rating of ‘AA’ or the equivalent by at least one of the four major rating agencies, and not lower than ‘BBB-’/‘Baa3’.

Additionally, the bond must comply with the criteria laid out in Article 22(4) of the Directive on undertakings for collective investment in transferable securities(UCITS) or similar safeguards for non-UCITS-compliant bonds.

Those eligible for the Eurosystem’s credit operations, which fall under this program, include euro area-based counterparties used by the Eurosystem for the investment of its euro-dominated portfolios.

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