, Columnist
ECB Bond Change Pulls the Rug from the Long End
And huge demand for the shortest securities will steepen Europe’s yield curves.
Thinking about his legacy.
Photographer: Horacio Villalobos/Corbis/Corbis News
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It certainly appears dovish that the European Central Bank expects to reinvest even more of its maturing holdings next year, as Bloomberg News reported Wednesday. It’s even more so if, as President Mario Draghi has suggested, officials relax the rules on how much time they can take to make reinvestments — more flexibility here gives them room to smooth ructions in the bond market.
But there’s something for the hawks as well. The net result could be to drive short-end yields for core European country bonds further into negative territory, and in the process steepen the yield curve.