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UPDATE 1-Swedish central bank starts corporate debt buys as part of COVID measures

* Riksbank announces start date for corporate bond-buying

* Will buy 10 bln SEK between Sept. 2020 and June 2021

* Will buy assets rated Baa3/BBB- or higher (Adds background, further c.bank comment)

STOCKHOLM, Sept 1 (Reuters) - Sweden’s central bank will buy corporate bonds for the first time later this month as part of its quantitative easing programme aimed at holding market rates down because of the COVID-19 pandemic, it said on Tuesday.

The central bank has poured money into the financial system in the hope of keeping credit markets functioning and reducing the impact of the pandemic on the economy.

At its meeting in early July, the Riksbank said it would expand its asset purchase programme, which already covered government debt, local authority bonds, mortgage-backed debt and commercial paper, to include corporate debt for the first time.

“The purchases will be made on the secondary market from the Riksbank’s monetary policy counterparties and will cover non-subordinated corporate bonds issued by companies with credit ratings equivalent to Baa3/BBB- or higher with a remaining maturity of up to five years,” the central bank said in a statement.

The central bank plans to buy 10 billion Swedish crowns ($1.16 billion) of corporate debt between Sept. 1, 2020 and June 30, 2021. The first purchase will be in the week beginning Sept. 14.

The Riksbank’s programme of loans and asset purchases has calmed markets since March, when interest rates spiked.

But the central bank said that the situation remained fragile.

“If the turbulence were to recur, there is a risk that the credit supply in the Swedish economy would deteriorate rapidly, which could lead to prolonged negative consequences for output and employment, resulting in falling inflation,” it said.

The central bank said it was developing ways to include a sustainability assessment in its asset purchase programme, which could affect which bonds it buys.

“The Riksbank also intends, as data become available, to measure and report on greenhouse gas emissions in the portfolio of corporate bonds being built up,” it said. ($1 = 8.6132 Swedish crowns) (Reporting by Simon Johnson; editing by Niklas Pollard and Barbara Lewis)

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