Eurozone bond-buying tops 52.5 bln euros in first month

April 08, 2015 11:45
The European Central Bank can claim success with the first phase of its bond-buying program completed, according to economists. Photo: Bloomberg

Eurozone central banks snapped up 52.5 billion euros (US$56.9 billion) of government bonds in the first month of a landmark quantitative easing (QE) program.

The purchases included 11.1 billion euros worth of German government bonds, and 8.75 billion euros and 7.6 billion euros in French and Italian bonds, respectively, the Financial Times reported Wednesday.

Central banks bought government bonds from all member states except Greece and Cyprus, which are banned from QE until they comply with the terms of their EU bailout programs, and Estonia.

Officials across the currency area started buying government debt on March 9 after policymakers unleashed a controversial 1.1 trillion euro QE program on Jan. 22 to tackle the threat of economic stagnation.

Policymakers on the European Central Bank's governing council said at the time they would buy 60 billion euros worth of private and public sector assets between March and September 2016.

The better news on the eurozone economy has sparked speculation that the ECB will begin to taper its bond-buying before the autumn of next year.

Yves Mersch, a member of the ECB’s executive board, on Tuesday signalled policymakers would consider paring their bond buying should inflation show signs of hitting the ECB’s target of below but close to 2 per cent earlier than expected.

Prices fell by 0.1 per cent in the year to March but the ECB expects inflation to hit 1.8 per cent by 2017.

Mersch told Börsen Zeitung, a German newspaper: “If we were to see that this process brings us to our goal earlier, then we are naturally not so tied to our decisions that we could not adjust things.”

Some market players have voiced concern the ECB would struggle to buy bonds in the amounts needed because of a lack of issuance of debt by major eurozone governments.

“With the first month of its expanded asset purchase program complete, the ECB can look back at a success,” said Christian Schulz of Berenberg Economics.

“The operational implementation has been smooth and the policy effectiveness probably exceeded the ECB’s own expectations.”

However, eurozone central bankers have privately acknowledged that it may become tougher for the ECB to buy in the volumes needed during the second half of the programme, set to end in the autumn of 2016.

Since QE was announced, the outlook for the eurozone’s recovery has improved, partly because of the impact of the policy in weakening the euro against the dollar.

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