(Adds detail, analyst and market reaction)
By David Milliken and Fiona Shaikh
LONDON, Feb 6 (Reuters) - The Bank of England said it would launch a scheme to purchase commercial paper issued by British companies on Feb. 13, unveiling the first concrete details of its Asset Purchase Scheme to tackle gummed-up credit markets.
The BoE said on Friday it would buy investment grade sterling paper both at issue and in the secondary market, to help channel funds directly to the corporate sector and make it easier for companies to borrow on capital markets.
Short sterling futures jumped on the news, with the March
contract
"It's one of the first measures we've seen during the crisis which in essence bypasses the banks (and) allows corporates to borrow directly from the Bank of England," said Jonathan Loynes, chief European economist at Capital Economics.
"So in that sense you could possibly see it as a first admission that banks are not going to get back to normal conditions in the foreseeable future."
The BoE said it wanted to introduce a similar scheme for British corporate bonds as soon as possible, and was currently consulting dealers -- with the likeliest option being for the BoE to buy a "modest" quantity of bonds to facilitate market-making.
"The Bank will keep under review whether there is a case for proposing to the Chancellor (Alistair Darling) that the list of eligible assets or currencies could usefully be expanded," the BoE said in the statement.
The BoE's asset purchase scheme was announced last month, and the British government has initially put 50 billion pounds ($73.3 billion) at the BoE's disposal to purchase high-quality private-sector assets.
Longer term, the BoE said it would consult on extending the scheme to include syndicated loans and asset-backed securities with viable securitisation structures, as well as how it should help the market for bank debt covered by the government's Credit Guarantee Scheme.
* For a full text of the BoE statement, go to http://www.bankofengland.co.uk/markets/marketnotice090206.pdf