• ECB QE Monitor
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6.05.2021  

ECB QE Monitor - May 2021

Published May 6, 2021

5 to 10 minutes

5 to 10 minutes

Key points for this month


  • The ECB's balance sheet is now equivalent to 65% of euro area GDP compared to 39% at the start of 2020.
     
  • ECB PEPP & APP: pace of purchases is accelerating
    • In April, total net purchase pace was €98.9bn vs. €96.8bn in March and €81bn in February, a clear uptick, which is really in line with our forecasts of €90-100bn/month.
    • PEPP: pace of monthly buying picked to €80bn in April from €73bn in March, bringing the total purchases under PEPP to €1017bn out €1850bn envelope that could be used until end of March 2022.
    • APP: the ECB settled €18.9bn in April vs. €23.3bn in March, below the target pace of €20bn/month. The monthly APP data shows 75% allocation to PSPP, in line with the 2020 average.
       
  • APP / PSPP:
    • Jurisdiction : deviation of PSPP purchases from capital key proportions was in favour of Germany, Italy, Spain and Netherlands against France, Finland, Portugal in April, likely due to redemption smoothening.
    • Average maturity : the average maturity of PSPP was 7.3 years in April with large deviation across jurisdictions. The average maturity of Supras increased since October 2020 from 7.3 to 7.9 years while the average maturity of Spain falls for the first in April below the threshold of 8 years.
       
  • APP / CSPP:
    • At the same time, although the PEPP remains oriented towards the public sector, CSPP’s share fell from 30% to 26% in April, confirming the volatility of the ECB’s corporate purchases. However, we expect CSPP purchases to accelerate again in the future, taking into account the combination of a low yield environment and lower expected net supply from good quality companies going forward.
       
  • APP / Redemptions:
    • APP redemptions in April 2021 will total €31.4bn, of which €24.9bn will be PSPP redemptions. Between April 2021 and April 2022, total APP redemptions will be €264bn, of which €202bn will be PSPP redemptions
       
  • No granular details for PEPP were available at this release as the ECB will only publish details of PEPP composition on a bimonthly basis and the next one will be in early June.

Our convictions


Divergences inside the board are likely to increase as the economic recovery starts. The debate about the assessment of “favourable financing conditions” is still open within the ECB. However, the ECB must maintain a stable cost of financing of public debt as long as economic fragmentation prevails in the Eurozone.
Fiscal policy can only be effective if sovereign yields remain low and stable even in the face of growing deficits. In the absence of a significant rise in growth expectations, the ECB stands alone in trying to avoid financial fragmentation. We expect the dovish majority to keep driving major policy decisions and to remain in a different camp with respect to the Fed in terms of mid to long term policy outlook.


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