ECB: “A sustained presence on the markets”
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The ECB decided to extend its Asset Purchase Programme (APP) by 9 months (up to December 2017, at least) and to reduce the volume of monthly purchases from EUR 80 bn to EUR 60 bn starting in April 2017.
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Given the scarcity of eligible securities, the ECB had to choose between the pace of monthly purchases and the duration of the programme. It opted to extend QE for a longer period but at a slower monthly pace.
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The ECB modified two parameters of its public securities purchase programme (PSPP) that concern the short end of the yield curve: the minimum maturity of eligible securities was reduced from 2 years to 1 year, and the deposit facility rate floor (which is currently -0.40%) was removed.
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Although December's decision will increase the total volume of purchases, it could trigger a slight upturn in long-term rates given the reduced monthly flows. Any upturn should remain limited, however, since Mario Draghi has made it clear that the ECB intends to maintain "a sustained presence" on the markets.
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