Views on the ECB's Governing Council converging on a limited, temporary increase of APP at Dec meeting; ECB could approve an envelope for APP or an increase limited in time with more frequent reviews, ECB sources say

• APP volume from April to be significantly lower than current APP plus PEPP buys


• ECB to signal unusually high flexibility and optionality


• Hawks pushing for no APP rise appear ready to compromise, fearing that doing nothing risks market turbulence


• New ECB programme or open-ended APP increase highly unlikely


• Commitment not to last beyond 2022, but some aim for signal that bond buys will last at least until end 2022

Reaction details (08:55)

• Marginal initial choppiness in both core and periphery EGB debt on this source update, though the benchmarks rapidly settled back around pre-release levels - see the analysis for more.

Analysis details (08:55)

• Reaction to this was minimal and short-lived as the source update is, in terms of the general tone, in-fitting with the recent FT source piece and commentary seen from the typically more hawkish members who have been fairly vocal recently (e.g. Kazmir and Muller). Overall, the piece indicates the ECB will be taking a seemingly prudent approach to its 'tapering' with the wind-down to occur throughout 2022. Although, the end date does have some discrepancy around it; a wind-down that could be accompanied by more frequent reviews as well, likely to appease the more hawkish members while providing the ECB with the breathing room to be flexible, if required.


• As a reminder, the ECB's December announcement is due next Thursday (December 16th) where we are expecting an update to the purchase plans with PEPP, currently, due to halt from March.

09 Dec 2021 - 08:49- Fixed Income- Source: Newswires