ECB Bond Buying May Last for Years, Says Pimco Money Manager
(Bloomberg) -- The European Central Bank will probably continue buying assets for years to come, according to a portfolio manager at Pacific Investment Management Co.
The central bank may end net purchases under its its pandemic bond-buying program in 2022, but then increase purchases under its its regular asset program, Konstantin Veit said in a statement.
“The ECB will remain highly accommodative for a long time as conditions for rates lift-off are unlikely to be met any time soon,” Veit said. “Similar to the Bank of Japan, policy sustainability considerations might increasingly gain in importance.”
The ECB announced Thursday that it will slow its pandemic bond-buying program in the final quarter of this year. The Governing Council will conduct purchases at a “moderately lower pace” than the roughly 80 billion euros ($95 billion) of monthly acquisitions deployed in the past two quarters.
Pimco, which has $2.2 trillion under management, expects policy makers to seek to reduce monthly asset purchases, probably toward 60 billion euros a month, in the second half of next year.
Barclays Plc has a similar view, predicting the ECB will buy 60 billion euros to 70 billion euros a month under the pandemic emergency program, plus 20 billion euros a month under its regular asset-purchase program. That will likely continue until March, when the PEPP program is expected to end, according to strategists including Silvia Ardagna.
The ECB’s move to persist with stimulus contrasts with major central banks elsewhere, a stance Christine Lagarde’s comments implicitly emphasized. The U.S. Federal Reserve and the Bank of England have signaled their intention to gradually unwind crisis-era aid.
“The real question lies in what will happen when the PEPP is exhausted,” said Joost van Leenders, senior investment strategist at Kempen Capital Management. “To prevent a sudden step down in the ECB’s asset purchases, APP monthly purchases will be increased.”
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