Is Europe’s QE programme on track?

On 9 March 2015 the ECB began purchasing European sovereign and agency bonds and supranational debt securities under the Public Sector Purchase Programme (PSPP). In our policy contribution published on 11 March 2015, we explained that the ECB would purchase sovereign debt according to the capital keys and according to the maturity distribution of outstanding debt while taking into consideration the self-imposed 2-30 year remaining maturity range and the 25% and 33% issue and issuer limits.  Today, the ECB published its PSPP holdings and the corresponding weighted average remaining maturities for each member state and the supranational institutions after the first month of purchases. The table below compares our calculations with the actual purchases.

For the time being, the Eurosystem is on track with its commitments as its purchases are roughly in line with our predictions. The Eurosystem purchased €41.7 billion in sovereign debt instead of the expected €42.6 EUR billion (i.e. 44 bn of sovereign bond purchases excluding Greece and Cyprus as they are not currently eligible for the reasons detailed in our policy contribution).  It purchased much less Latvian and Maltese debt than expected, perhaps because of the size of the markets or maybe because it anticipated that the 25% issuer limit will be reached quickly, and therefore chose to space the purchases out over the length of the program.

In terms of the maturity structure of the purchases, the weighted average maturities published today correspond only very broadly to our estimates, which were calculated from the actual maturity distribution of each country’s outstanding 2-30 year debt before QE started, thus ensuring market neutrality of the purchases. For instance, significant differences can be noted for Germany, Spain, Portugal and the Netherlands. Interestingly, in Germany, the average maturity of the bonds purchased is shorter than the one of the overall observed distribution, despite negative rates on the shorter end of the yield curve. However, the weighted average maturities of the purchases are both above and below our estimates depending on the countries. It is therefore difficult to conclude yet that these discrepancies indicate that the Eurosystem significantly and purposefully deviates from purchasing according to the current outstanding distribution.

This article was originally published by Bruegel, the Brussels-based think tank. Read the article on their website here. Publication does not imply endorsement of views by the World Economic Forum.

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Authors: Grégory Claeys joined Bruegel as a research fellow in February 2014. Álvaro Leandro Fernández-Gil works at Bruegel as a Research Assistant in the area of Global and European Macroeconomics. Allison Mandra joined Bruegel in November 2014 as a research intern.

Image: The Euro currency sign is seen next to the European Central Bank (ECB) headquarters in Frankfurt November 6, 2012. REUTERS/Lisi Niesner.