ECB Credit: Private-sector purchases to remain sizeable – Danske Bank

Sverre Holbek, Senior Analyst at Danske Bank, suggests that they think that ECB’s QE composition could also factor in the discussions at the December meeting.

Key Quotes

“The October ECB Minutes stated that ‘the purchase volumes under the three private sector purchase programmes would remain sizeable and the private sector programmes would not be adjusted in strict proportion to the overall scaling-down of the APP’.”

“In our view, this suggests that the corporate bond and covered bond purchase programmes’ (CSPP and CBPP3, respectively) share of total net purchases will be increased from January 2018. The ABS purchase programme has played only a minor role due to the lack of eligible assets.”

“In our view, CSPP is likely to account for the bulk of private sector purchases, given that the ECB’s ownership rate is lower within the corporate market. However, the ECB is also likely to remain active in the covered bond market, particularly in the primary market. Furthermore, purchase flows will also be supported by redemptions, with EUR1.6bn of covered bonds maturing per month on average from January through to end-September 2018.”