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20.09.2021  

ECB QE Monitor - September 2021

Published September 20, 2021

5 to 10 minutes

5 to 10 minutes

Key points for this month


  • ECB PEPP & APP: slowdown in the pace of purchases, in line with the seasonal activity.
     
  • PEPP
    • Purchases amounted to €65 billion in August compared to € 88 billion in July, bringing the total purchases under PEPP to €1,337 billion out of an envelope of €1,850 billion usable until the end of March 2022.
    • The PEPP remains heavily oriented towards the public sector. 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 October.
       
  • APP
    • Purchases slowed to € 16.7bn in August against € 21.7bn in July, below the monthly target of € 20bn.
    • In August APP by programme:  PSPP (€13.6bn; 81% of total), CSPP (€3.9bn; 23%), CBPP3 (€1bn; 6%) and ABSPP (€-1.7bn; -10%).
    • In August, deviation of PSPP purchases from capital key proportions was in favour of Supras, France, Germany and Finland and against in Spain and Italy, likely due to redemption smoothening.
    • The average maturity of the PSPP reached 7.3 years in August. The average maturity of Supras has continued to increase since October 2020 from 7.3 to 8 years.
    • APP redemptions in August 2021 amounted to €8.3bn, including € 4.4bn in PSPP. Between September 2021 and August 2022, total APP redemptions will be €263bn, of which €198bn will be PSPP redemptions.

Our convictions


  • The ECB announced a slowdown in bond purchases : this is not a tapering. This is a recalibration of a flexible program as the recovery is already well underway and financing conditions have strongly improved during the summer. Under the current €1,850bn PEPP envelope, we expect the ECB to buy an average of €70bn per month between September and the end of March.
     
  • The most important point concerning the ECB is the continuation of monetary support after March. 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 monetary policy decisions.
     
  • According to Christine Lagarde, the December meeting will be the one to watch for the monetary support after March.

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