ECB Bond-Buying Program Could Hinge on German Debt Supply

30-Mar (Wall Street Journal) — The European Central Bank may have to tweak the rules of its massive bond-buying program because German debt is in short supply.

The ECB plans to buy €60 billion ($65 billion) of assets each month until at least September 2016 to kick-start the region’s economy. German government bonds form a cornerstone of the program, accounting for about €11 billion in monthly purchases. The ECB has said it would buy bonds from two to 30 years in length as long as the yield is above its deposit rate of -0.2%, and that it doesn’t expect any problems finding them.

But yields on many German bonds are already lower than that. The ECB’s own rules prevent it from buying 42% of already-issued German government bonds, compared with 28% shortly before March 9 when the stimulus program began, according to Tradeweb data.

Many traders say the central bank will run out of road unless the central bank changes some terms of its bond-buying.

[source]

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