Positive Net Asset Purchases As Focus Turns To PEPP Decisions

The ECB's portfolio of securities held for monetary policy purposes saw positive net purchases for the first time in 13 weeks last week, at E1.1bln (-E6.3bln prior).

• This was driven entirely by E2.1bln in net PEPP purchases (E2.2bln of gross buys vs E0.1bln redemptions). APP holdings fell by E1.1bln, with PSPP holdings down E0.6bln and CSPP down E0.5bln.
• The overall uptick is of course unusual, with APP uncapped runoff underway, but PEPP reinvestment policy will be a focus of the next few ECB meetings.
• Our baseline scenario for this Thursday's meeting (our preview is here) in this regard is that there may be some indication that discussions around PEPP reinvestments have occurred, and perhaps the relevant committees have been tasked with investigating the possibility of an early conclusion, but there is unlikely to be any further information at this stage.
• As noted in our preview, sell-side analysts see an announcement on tapering/ending reinvestments as unlikely until early next year (at the earliest) - with April 2024 looking like an increasing focus for the beginning of unwinding, including an announcement in early 2024. Though there are some lingering expectations that the ECB could as soon as this week week announce it intends to initiate PEPP tapering next Spring. See our preview for more.