The European Central Bank said it reached its target of 60 billion euros ($67 billion) of bond purchases in the second month of its quantitative-easing program, as investors pushed back against negative yields.
The Frankfurt-based ECB settled 47.7 billion euros of public-sector purchases in April, and filled the rest of the monthly quota with covered bonds and asset-backed securities. That takes the total sovereign and supranational debt bought so far to 95.1 billion euros. The weighted average maturity of holdings fell to 8.25 years from 8.56 years at the end of March.
Investors wiped 55 billion euros off the region’s government bonds on April 29 as they shunned European debt amid signs of the return of inflation, and dealt Germany’s 10-year bonds their steepest two-day loss in more than three years. Euro-area consumer prices ended a four-month streak of declines in April, underpinning ECB President Mario Draghi’s claim that QE is already starting to have an impact.
The ECB said 11.1 billion euros were spent on German debt in April, making up the biggest contribution to public-sector asset purchases in the region. Malta’s 53 million euros was the smallest. The weighted-average maturities ranged from 5.2 years in Lithuania to 10.8 years in Portugal.
The Frankfurt-based institution embarked on large-scale asset purchases in March and envisages spending 1.1 trillion euros through September 2016. Bank lending increased in March for the first time since 2012 and encouraging data from Germany to Spain point to a strengthening recovery even as the Greek crisis undermines confidence.
Last week, Bill Gross, who ran the world’s largest bond fund until last year, called the 10-year German bund the “short of a lifetime.” DoubleLine Capital’s Jeffrey Gundlach said he’s considering making an amplified bet against German bonds to join a growing group of top money managers wagering against the debt.
The average yield on all outstanding German sovereign debt dropped below zero last month, and was negative on bonds with maturities of as long as nine years. Prices reversed on April 21, and the yield on the nation’s 10-year bunds rose the most since January 2013 last week. Yields on French bonds of similar maturity rose to the highest level since early March.
The ECB said it settled purchases of 1.16 billion euros of ABS and 11.5 billion euros of covered bonds in April.