The ECB Bond Plan in a Demitasse Cup

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  • Purchases will begin on March 9th, this coming Monday
  • ECB will buy €60 billion each month
  • Individual euro zone central banks will do the actual purchasing
  • Debt with negative yield is permitted as long as that yield is not below the ECB deposit rate at the time of purchase, currently -0.2 percent.  The generic 2 year euro government bond is yielding -0.20 percent. Six EMU countries have 2 year notes with negative yields.
  • The ECB will only buy in the secondary market, existing securities not new issues.
  • The ECB will not buy more than 25 percent of any one bond
  • The ECB will buy debt with remaining maturity between 2 and 30 years only
  • If enough sovereign debt is not available to complete the purchase amount the bank will allow substitute purchase from the list below:

Council of Europe Development Bank: European Atomic Energy Community; European Financial Stability Facility; European Stability Mechanism; European Investment Bank; European Union; Nordic Investment Bank; Caisse d’amortissement de la dette sociale (CADES); Union Nationale Interprofessionnelle pour l’Emploi dans l’Industrie et le Commerce (UNEDIC); Instituto de Credito Oficial; Kreditanstalt fuer Wiederaufbau; Landeskreditbank Baden-Württemberg Foerderbank; Landwirtschaftliche Rentenbank; NRW.Bank

EMU Negative 2 Year Generic Rates: Germany-white; Austria-yellow; Belgium-green; Finland-purple; France-red; Netherlands-orange

EMU negatives march 5

 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

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