Europe: PSPP maturity at new high and QE set to slow to EUR60bn in August – Danske Bank

Chief Analyst, Anders Møller Lumholtz at Danske Bank, notes that the drop in EGB yields combined with the -40bp deposit limit pushed the PSPP purchases further out on the curve in July.

Key Quotes

“The monthly average maturity in the PSPP hit a new high of 10.3 years in July according to our calculations. In Germany the monthly average maturity increased to 10.5 years versus an average of eight years (since the start of the programme). In Germany 63% of the market (market value) is trading with a yield below -40bp and thereby not eligible for QE. New highs in the average maturity on the monthly purchases were hit in all semi-core markets.

Total purchases slowed in July to EUR80.6bn and we expect QE to decrease to around EUR60bn in August. A slowdown to around EUR60bn would ensure that the average monthly purchases including the H1 frontloading would be in line with the monthly targets. The monthly net purchases in July amounted to EUR69.7bn in the PSPP, EUR6.8bn in the CSPP, EUR3.6bn in the CBPP3 and only EUR854m in the ABSPP.

Purchases in Portugal decreased significantly in July to EUR958m down from EUR1.43bn in June. The decrease is likely related to concerns about the issue/issuer limit.”