MNI POLICY: ECB Technical Parameters For APP Reinvests: Text

     FRANKFURT (MNI) - Following is the reinvestment parameters text published

by the ECB Thursday following the post-policy meeting press conference:

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     ECB decides on technical parameters for the reinvestment of its asset

purchase programme 

     13 December 2018

     ECB details technical parameters for APP reinvestments ECB capital key, as

amended over time, to continue guiding public sector purchase programme during

reinvestment The Governing Council of the European Central Bank (ECB) today

decided on the technical parameters for the reinvestment of the principal

payments from maturing securities purchased under its asset purchase programme

(APP) after net asset purchases cease at the end of December 2018.

     The Governing Council will aim to maintain the size of its cumulative net

purchases under each constituent programme of the APP, i.e. the public sector

purchase programme (PSPP), the asset-backed securities purchase programme

(ABSPP), the third covered bond purchase programme (CBPP3) and the corporate

sector purchase programme (CSPP), at their respective levels as at the end of

December 2018. Limited temporary deviations in the overall size and composition

of the APP may occur during the reinvestment for operational reasons.

     For the PSPP, the allocation across eligible jurisdictions will continue to

be guided, on a stock basis, by the respective national central banks'

subscription to the ECB capital key, as amended over time. As a rule, therefore,

redemptions will be reinvested in the jurisdiction in which principal repayments

are made, but the portfolio allocation across jurisdictions will continue to be

adjusted with a view to bringing the share of the PSPP portfolio into closer

alignment with the respective national central banks' subscription to the ECB

capital key. Any adjustment to the portfolio allocation across jurisdictions

will be gradual and will be calibrated as appropriate to safeguard orderly

market conditions.

     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. Within the PSPP, purchases

of securities with a yield to maturity below the interest rate on the ECB's

deposit facility will continue to be undertaken to the extent necessary.

     For the private sector programmes, market capitalisation will continue to

be the guiding principle for reinvestment purchases. Purchases of securities in

primary markets will continue to be permitted as necessary. With regard to the

CBPP3, the Governing Council also clarified that all CBPP3-eligible covered

bonds with a conditional pass-through structure will be excluded from purchase

as of 1 January 2019.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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