ECB: Capital key to guide the reinvestments – Nordea Markets

Jan von Gerich, Research Analyst at Nordea Markets suggests that How to conduct the reinvestment programme has become the most recent topic of argumentation at the ECB’s Governing Council.

Key Quotes

“The main questions relate to which bonds the maturing bonds will be invested, which capital key will be used, and should there be some deviation in the maturities bought between different countries (so called operation twist).”

“We think the ECB will continue to use the capital key to guide its reinvestments. We do not think the ECB is willing to resort to any kind of operation twist, at least openly, because it would also open the ECB to more criticism of political interference.”

“Most likely then, the ECB will take a roughly similar approach to the reinvestments to that it has had in the net bond purchases as well, in terms of the maturity of bonds it is buying, and it will not concentrate in buying just one part of the yield curve.”

“The ECB is scheduled to update its capital key at the start of next year.”