• Irish bond-buying also below share implied by ECB rules
  • Central bank is frontloading purchases before summer liquidity

The European Central Bank’s purchases of Portuguese and Irish bonds as part of its extended quantitative easing were below the amount targeted in the program’s rules for the second straight month in May.

Meanwhile, the acquisitions were above the so-called capital key indications for debt of nations including Germany, France, Spain and Italy. The slowdown in Portuguese and Irish purchases may be an early sign that the national central banks that carry out the QE program may run out of bonds to buy before it is set to finish in March 2017. There are limits on how much the central banks may own of each bond, and each nation’s overall debt.

“The ECB have already lowered purchases in Ireland and Portugal in order to prevent that they will hit the issue or issuer cap prior to March 2017,” said Anders Moller Lumholtz, chief analyst with Danske Bank A/S in Copenhagen.

In the case of Portugal, he said it was “due to the Security Markets Programme holdings,” while in Ireland the shortfall probably reflects “the swapped ‘promissory notes’ holdings,” referring to central-bank interventions from the time of the region’s sovereign-debt crisis.

The ECB has been accelerating, or frontloading, purchases that are intended to amount to an average 80 billion euros ($91 billion) a month before the European summer begins and liquidity dissipates in August.

In May, 1.45 billion euros of Portuguese bonds were purchased, according to data published on June 6. Given the nation’s capital key allocation of 2.5 percent, buying would have needed to reach 1.8 billion euros, according to data compiled by Bloomberg. Irish purchases were 1.11 billion euros but could have been 1.15 billion euros.

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