Breaking: ECB announces €750 billion pandemic emergency purchase programme

After an emergency meeting, the ECB has decided don and has announced a €750 billion pandemic emergency purchase programme (PEPP).

There has been no reaction on the EUR thus far. 

Press release

Key notes

• ECB says to launch a new temporary asset purchase programme of private and public sector securities to counter the serious risks to the monetary policy transmission mechanism.
• Says purchases will be conducted until the end of 2020 and will include all the asset categories eligible under the existing asset purchase programme.
• Says for the purchases of public sector securities, the benchmark allocation across jurisdictions will continue to be the capital key of the national central banks.
• Says to the extent that some self-imposed limits might hamper action that the ECB is required to take in order to fulfil its mandate, the governing council will consider revising them to the extent necessary.
• Says at the same time, purchases under the new PEPP will be conducted in a flexible manner. this allows for fluctuations in the distribution of purchase flows over time, across asset classes and among jurisdictions.
• Says a waiver of the eligibility requirements for securities issued by the greek government will be granted for purchases under PEPP.
• Says the governing council is fully prepared to increase the size of its asset purchase programmes and adjust their composition, by as much as necessary and for as long as needed.
• Says the governing council will terminate net asset purchases under PEPP once it judges that the coronavirus COVID-19 crisis phase is over, but in any case not before the end of the year.
• Says to expand the range of eligible assets under the corporate sector purchase programme (CSPP) to non-financial commercial paper, making all commercial papers of sufficient credit quality eligible for purchase under CSPP.
• Says the governing council of the ECB is committed to playing its role in supporting all citizens of the euro area through this extremely challenging time.

Update: EUR/USD has popped in a delayed reaction in a warn out market place. At the time of writing, EUR/USD has rallied to 1.0938 for the high in Asia from a 1.0909 pre-announcement level. There is more volatility to come. 

Update 2: EUR/USD has rallied to a high of 1.0981 and slammed back into the 1.0940s since the announcements. Europan stock futures have also rallied in Asia following a poor start. 

Update 3: EUROSTOXX 50 FUTURES STXEC1 rise 2.9% in Asia after ECB announcement on asset buying.

Given today’s focus on bond purchases, it is unlikely that the ECB will cut rates further although this is a very fluid situation, so, stay tuned in, although the ECB is certainly trying to do all possible to avoid it, it is the second time they have decided not to during this crisis.