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5.11.2021  

ECB QE Monitor - November 2021

Published November 5, 2021

5 to 10 minutes

5 to 10 minutes

Key point for this month


ECB PEPP & APP: In October, total net purchase pace was around €91bn vs €95bn in September.

PEPP

  • Purchases amounted to €67.8bn in October, a slight decline relative to the €75bn bought in September and consistent with a moderately lower pace of purchases relative to Q2 and Q3 2021. This brought the total purchases under PEPP to €1,467bn 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).
  • No granular details for PEPP were available at this release as the ECB will only publish details of PEPP on a bimonthly basis and the next one will be in early December.

APP

  • Purchases settled €23.2bn in October vs. €19.7bn in September, above with the monthly target of € 20bn.
  • In October, APP by programme: PSPP (€15bn; 64.9% of total), CSPP (€5.5bn; 23.6%), CBPP3 (€1.01bn; 4.35%) and ABSPP (€1.7bn; 7.2%).
  • The average share of public sector purchases over the past six months is below 70% of the aggregate purchases at 68%. o The average maturity of PSPP remains stable at 7.3 years in October.
  • The average maturity of Supras has increased since October 2020 from 7.3 to 8.2 years, but in October it remained stable compared to September.
  • Deviation of PSPP purchases from capital key proportions was in favour of Supras, Spain and Italy and against in France, likely due to redemption smoothening.
  • APP redemptions in October 2021 amounted to €23.7bn, including €19.2bn in PSPP. Between November 2021 and October 2022, total APP redemptions will amount to €292bn including €224bn of PSPP redemptions.

Our convictions


During the ECB press conference in October, Christine Lagarde made no new political announcements, the central bank having already effectively communicated that it would unveil its political strategy for 2022 at the December meeting:

  • The new set of economic forecasts will be available, together with a clearer projections on expected EGB net issuance for 2022. As the pace of QE in 2022 is likely to be a function of both the outlook for inflation and net supply, the December meeting will represent the best time to take most of the decisions and to calibrate future monetary stimulus.
  • We also expect changes to TLTRO3 to be announced in December, with the last auction at current conditions taking place. Under this respect, Mrs Lagarde was quite explicit on the need to avoid cliff effects on outstanding liquidity, therefore indicating a likely gradual calibration of this tool, quite effective in keeping easy financing conditions in both pandemic and current recovery phase.

We estimate that the ECB's programs have nearly € 480 billion in combined net purchasing power until the end of March 2022, assuming full use of the purchasing power remaining in the PEPP and a net APP target of 20 billion euros / month.

In 2022, we expect the ECB to maintain a noticeable pace of asset purchases relative to historical norms, calibrating the size of QE to absorb the bulk of net issuance as in the past two years.

 

We forecast QE firepower for next year in the order of 600 billion euros and 700 billion euros in 2022. This could be done by increasing the current APP program from 20 billion euros to a minimum of 40 billion euros per month.


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