With the latest ECB statement due out in just two days, traders are curious to see how Mario Draghi will escape from the trap in which the European central bank has found itself: on one hand, seeking to temper the recent dramatic rise in the Euro, on the other running out of QE eligible private-sector debt to monetize, especially in its largest captive market, Germany. While we don’t know how Draghi will succeed (or fail) in this endeavor, overnight Deutsche Bank has released a useful analysis breaking down what share of bond markets the biggest central banks currently own.
In the analysis, DB puts the ECB CSPP holdings in the context of global QE by comparing what part of relevant markets is owned by major central banks. Then it provides a more granular update on the latest CSPP purchases, including the geographic breakdown of the current CSPP universe. Further, it focuses on the CSPP vs. PSPP dynamics, noting the conflicting signal between Q2 and the summer months. Finally, it addresses the question whether in selected jurisdictions CSPP purchases could be used to partly replace PSPP purchases if for one reason or the other the ECB cannot exit QE any time soon and scarcity becomes a hard, binding constraint in some government bond markets.
The answers are shown in the table below, which compares central bank QE holdings across asset classes with Deutsche Bank’s estimates of the size of the corresponding markets. Using those estimates, the German lender calculates the fraction of each relevant universe in central bank ownership.
This post was published at Zero Hedge on Sep 5, 2017.