Accounts Show Discussion of Slowing PEPP Purchases is Premature

Notable highlights of ECB accounts:

However, the rise in yields had not been uniform across euro area countries. Idiosyncratic factors had likely contributed to these developments, and there had been no signs of market fragmentation.

They go into some discussion on the rise in global term premium - citing:

1. Investors had become convinced earlier this year that a global recession was imminent and that central banks worldwide would have to cut interest rates substantially
2. Changes in the supply of, and demand for, US Treasuries
3. Investors’ positioning in the US Treasury market.

• There were different views on the desirability of higher long-term rates for the euro area, with higher long-term rates potentially render fiscal sustainability more challenging for some euro area countries.
• On the other hand, higher long-term rates could be welcomed after a long period in which term premia had been substantially compressed. They would strengthen monetary policy transmission to activities based on longer-term credit and signal to governments that longer-term borrowing would be more costly in the future.

• There was broad agreement that continuity in PEPP reinvestments would be consistent with a decision to keep interest rates unchanged at the October meeting
• A discussion of an early termination of PEPP reinvestments at the current meeting was seen as premature.