Economy EU

Economy EU: ECB clarified details regarding the €1.1t QE program, which will start next Mon, 9 Mar ’15 till Sep ’16, or €60b/month

Summary of operational details:
- The €60b is split between €45b investment-grade sovereign bonds, €5b Eurozone public agencies’ debts, and €10b covered bonds and asset-backed securities

- Size of purchases of Eurozone member’s government bonds will be based on ECB’s “capital key”, i.e. contribution of members to ECB’s capital, implying the sovereign bonds of Germany, France and Italy will account for almost half of the Government’s bond purchases


- Purchases will be gradual and broad-based to avoid unduly excessive distortions in market pricing mechanism

- Purchases of negative-yield debt are allowed as long as the yields are above ECB’s deposit facility rate of -0.2%. If volume of debt to be purchased according to ECB’s capital key is insufficient, substitute purchases will be permitted.


- QE may continue beyond Sep ’16 if inflation rate remains substantially below or not progressing towards ECB’s 2% target.