ECB Will Reinvest Maturing QE Bonds Over a Year in Revised Plan

(Bloomberg) -- The European Central Bank extended its window for reinvesting bonds held under its quantitative-easing program, giving itself one year instead of three months to make purchases.

The move is aimed at ensuring the central bank has the flexibility to avoid rocking the market, given that the value of bonds maturing from the 2.6 trillion-euro ($3 trillion) portfolio can vary wildly from month to month.

The reinvestment program has gained a new prominence after the ECB decided on Thursday to stop adding to its QE holdings, a landmark decision marking the end of almost four years of purchasing debt to fend off the threat of deflation.

“During the reinvestment phase the Eurosystem will continue to adhere to the principle of market neutrality via smooth and flexible implementation. To this end, the reinvestment of principal redemptions will be distributed over the year to allow for a regular and balanced market presence.”

Key Insights

©2018 Bloomberg L.P.