Asset purchase programmes

A central bank’s large-scale asset purchases are intended to bring down risk premiums and/or term premiums. In practice, this means that the purchases exert downward pressure on long-term interest rates, even if short-term rates have reached their lower bound. Via this effect on long-term interest rates, monetary policy continues to exert very direct influence over the investment and consumption expenditure of firms, households and government, as decisions on consuming or investing in durable goods generally concern the medium or long term.

The Eurosystem introduced the following asset purchase programmes:

  • the securities market programme (SMP), with purchases from May 2010 to September 2012;
  • the outright monetary transactions (OMTs) which could be activated from September 2012 onwards;
  • the extended Asset Purchase Programme (APP), in force since October 2014;
  • the Pandemic emergency purchase programme (PEPP), with purchases launched in March 2020.

The ECB Governing Council decided on 18 March 2020 to launch a new temporary programme for purchasing private and public sector securities. The Pandemic Emergency Purchase Programme (PEPP) aimed to contain the serious risks for the monetary policy transmission mechanism and the outlook for the euro area resulting from the outbreak and exponential spread of coronavirus. Initially, purchases under this programme were possible up to a total of € 750 billion. However, during 2020 the programme was further extended in two stages to € 1 850 billion. Purchases under this programme will continue until at least the end of March 2022, while reinvestment of the principal from PEPP securities reaching maturity will continue until at least the end of 2023.

Securities bought up under the PEPP come on top of the purchases under the current asset purchase programme (APP). From March 2015 up to the end of March 2016, the average monthly asset purchases under the APP worked out at €60 billion and between April 2016 and March 2017, it was €80 billion, while the amount purchased from April 2017 to the end of December 2017 again came to €60 billion. From January to September 2018 inclusive, average monthly purchases amounted to €30 billion, from October 2018 to the end of December 2018, the corresponding figure was €15 billion. Since November 2019, the average monthly asset purchases under the current APP have amounted to €20 billion.

In 2020, in order to counteract the repercussions of the coronavirus crisis, net purchases under the APP were extended by an extra temporary package of € 120 billion, as decided by the ECB Governing Council on 12 March.

The Governing Council is still expecting the monthly net asset purchases under the APP to continue as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the ECB’s key interest rates. Full reinvestment of the principal payments from securities purchased under the APP which have reached maturity, will continue for an extended period of time past the moment the Governing Council starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.

Further information about the Eurosystem’s asset purchase programmes can be found on the ECB’s website by clicking on this link: Asset purchase programmes and Pandemic emergency purchase programme.

Securities lending of assets purchased under the APP and PEPP

As announced at the ECB Governing Council meetings on 5 March 2015 and 1 June 2016, the assets acquired under the public sector purchase programme (PSPP) and the corporate sector purchase programme (CSPP) will be released in a decentralised manner for securities lending operations to support bond and repo market liquidity. Assets acquired via the pandemic emergency purchase programme (PEPP) are also available for securities lending operations, under the same conditions as the asset purchase programme (APP). For further information on the Eurosystem’s general framework for lending operations, see: Securities lending of holdings under the asset purchase programme (APP) and pandemic emergency purchase programme (PEPP).

Securities lending under the PSPP and the PEPP (public sector)

The National Bank of Belgium will lend the public sector securities purchased under the PSPP and the PEPP (see list of available ISIN codes in appendix) via bilateral repurchasing operations (repos) or bilateral repos combined with bilateral reverse repos with counterparties that have concluded a contract with the NBB for repos in euro.

Further information can be found in the following documents:

Securities lending under the CSPP and the PEPP (corporate sector)

Also under the CSPP and the PEPP, the National Bank of Belgium will offer the possibility to lend corporate securities via bilateral repos combined with bilateral reverse repos with counterparties that have a contract with the NBB for repos. Alongside this bilateral lending, the NBB has decided to take part in Euroclear Bank SA/NV’s Automatic Securities Lending and Borrowing Programme.

Further information can be found in the following documents:

Contact

Market participants can contact NBB’s Front Office desk via e-mail at forex@nbb.be or by phone on +32 2 221 4971.