ECB further ramps up government bond purchases

The ECB has been buying more government bonds in recent months, according to Figures of the central bank. In April, the central bank added €80 billion of government bonds to its balance sheet, the highest level since July last year. A month earlier, it withdrew €73.5 billion worth of bonds from the market, while the total in February was €60 billion. The central bank decided to further increase its bond-buying programme in February. In their own words, to improve financing conditions for businesses and households. 

However, buying more government bonds seems to have little effect on the bond market. Interest rates on government bonds have risen further since February. Not only in Germany, but also in Spain and Italy. This is despite the fact that Spanish and Italian interest rates reacted positively last year to the announcement of the new asset purchase programme by the central bank. For example, the German 10-year yield rose to -0.2%, the highest level in almost two years. Spanish and Italian 10-year yields have also risen somewhat since February and are now at their highest levels since the summer of last year.

Last year, the market was reassured by the bond-buying programme, but now the market hardly seems to be reacting to it. In fact, the Dutch 10-year yield is almost back positive. This is despite the fact that the ECB has already bought more than €1 trillion worth of debt securities under the PEPP programme. Has the ECB's trick worn off?

ECB further increases purchases of government bonds

This contribution was made from Geotrendlines