Back on March 10, when the ECB stunned the world and announced it would monetize corporate debt, we laid out a snapshot of the total size of Europe's Investment Grade bond market...

And added that "It is unclear what happens to those IG bonds that the ECB has purchased if and when they get downgraded to junk."

We are about to find out.

"Picking winners" was never a good idea for policymakers - no matter what the economics textbooks say - and now the 'market' has given the ECB a big headache. Draghi's corporate-bond-buying scheme has backfired as the European Central Bank finds itself holding junk bonds in its so-called 'stimulus' plan after K+S AG was downgraded by S&P (sending its price plunging).

As Bloomberg reports, S&P cut the debt of Europe’s biggest potash producer one step to a level below investment grade.

The downgrade means that the bonds have no investment-grade ratings that would make it eligible for the ECB’s asset-purchase program.

Before the buying began, the ECB said it wouldn’t have to automatically sell notes downgraded to junk, but it has also said it will take steps to manage risks in its holdings. The central bank has bought 34 billion euros ($37 billion) of investment-grade corporate bonds since starting its stimulus program in June.

“Hopefully the ECB was aware in advance that there’s a price to pay for putting so much money into the market in this way,” said Gordon Shannon, a money manager at TwentyFour Asset Management, which oversees about 7.3 billion pounds ($8.9 billion).

“If they’ve bought a bond from a company that goes bankrupt, for example, they might never get their money back. Investors expect them to hold onto these bonds for years, and if they don’t, the market will be shaken.”

The Kassel, Germany-based company has 1.5 billion euros of bonds maturing in December 2018, December 2021 and June 2022, according to data compiled by Bloomberg. The Frankfurt-based ECB has holdings in all three of K+S’s bonds, according to a list of notes from the central bank.

All the notes declined on Friday, led by the 2021 securities, which fell 1.5 cents on the euro to 111 cents, the lowest in almost a year.

An official at the ECB declined to comment on whether the central bank planned to sell its holdings of K+S.

Meanwhile, Greece remains outside of the ECB's Sovereign bond-buying scheme?