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ECB QE Monitor - February 2022


14 February, 2022

5 to 10 minutes
ECB QE Monitor - February 2022

14 February, 2022

5 to 10 minutes

Key Points

  • ECB PEPP & APP: In January 2022, total net purchase pace was around €69bn vs €66bn in December 2021.
  • PEPP
    • Purchases amounted to €50bn in January, in line with December and consistent with a moderately lower pace of purchases relative to Q2 and Q3 2021. This brought the total purchases under PEPP to €1,645bn out of an envelope of €1,850bn usable until the end of March 2022.
    • The PEPP remains heavily oriented towards the public sector (around 97% of PEPP purchases).
    • The ECB also published the bi-monthly detailed split for PEPP for Dec.21-Jan.22 at this release:
      • The bimonthly public sector total for Dec.21-Jan.22 stood at €99.2bn, below with Oct.2021-Nov.2021 levels
      • The share of supras decreased slighly to 10.2% in Dec.21-Jan.22, but remained close to the highest bi-monthly level since the start of the program
      • At the country level, deviation of PEPP purchases from capital key proportions was in favour of Supras, Italy and Germany and against in Portugal and Netherlands.
  • APP
    • Purchases settled €18.8bn in January 2021 vs. €17bn in December 2020, still slightly below with the monthly target of € 20bn.
    • In January, APP by programme:  PSPP (€17.3bn; 91.8% of total), CSPP (€7bn; 37%), CBPP3 (€-3.76bn; -19.96%) and ABSPP (€-1.7bn; -8.8%).
    • Shares of public sector and corporate sector securities was above the level of recent months. Redemptions were particularly high on covered bond and ABS.
    • The average maturity of PSPP remained stable at 7.3 years in January.
    • Deviation of PSPP purchases from capital key proportions was in favour of France and Italy (with €12.9bn, which represents 78% of PSPP net purchases ex-supras) and against in Netherlands and Spain, likely due to redemption smoothening.
    • APP redemptions in January 2022 amounted to €35bn, including €20.9bn in PSPP. Between February 2022 and January 2023, total APP redemptions will amount to €262bn including €208bn of PSPP redemptions.

Our convictions:

We will closely monitor the evolution of the global picture in the Eurozone. We will watch closely: (1) the risks of a second round effect in countries such as Germany and (2) the impact of the ECB's monetary policy on financing conditions.

  • Inflation is skyrocketing amid soaring energy and food prices.
    • Unanimous concern at the ECB about inflation. The ECB fears second-round effects, with inflation remaining high for longer than expected.
    • The ECB cannot remain the only major central bank to continue to communicate that high inflation is a transitory. Credibility problem.
  • The economic fragmentation of the euro zone could be exacerbated iTn this environment
    • The likelihood of a second-round effect is higher in countries like Germany (full employment, minimum wage increase) than in countries like Spain (double-digit unemployment rate).
    • The rise in energy prices will penalize consumption and investment.
  • The ECB has no choice but to raise interest rates.
    • The ECB should revised on the upside its medium term inflation target in March.
    • The criteria for raising rates should be met after the update of the economic projections.
    • Moreover, even the most accommodating members of the ECB are reluctant to maintain negative rates.
  • An ECB rate hike implies an early end to the asset purchase program.
  • We should monitor the impact of the end of the ECB's net asset purchases on financing conditions.

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