ECB Purchases Below Deposit Floor Come Into Force on January 13

  • Legal note shows implementation later than market expectations
  • Average maturities holdings in Germany by ECB may fall

Changes to the parameters of the European Central Bank’s bond-buying program announced at its December policy meeting are now set to come into force on Jan. 13.

The ECB said in a Dec. 8 statement that the changes were effective as of Jan. 2, though it also said that implementation details were still to be worked out by the relevant committees. The new date was announced in a legal note on its website dated Jan. 11.

The ECB in December moved to increase the pool of bonds eligible for its quantitative easing purchases, including those with yields below its deposit rate of minus 0.4 percent. Officials also decreased the lower-maturity bound to 364 days from a limit of two years, making further securities available for purchase.

These changes to the QE program led German two-year notes, which yield below the deposit rate floor, to rally as they became eligible for purchases.

Investors will look for clues on how many bonds are purchased in these shorter maturities in the ECB’s monthly breakdown of debt securities, which is next due on Feb. 6. The latest data show the average weighted maturity in Germany at 8.16 years, the longest since the program began in March 2015.

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