Bloomberg: Greek bonds outside QE – The alternative under consideration

The ECB is considering giving more flexibility to its emergency bond market program, known as PEPP, to support the most vulnerable countries, such as Greece, which Bloomberg says does not appear to be part of the traditional APP liquidity mechanism or QE after March. of 2022.

This flexibility in the PEPP program will provide for better refinancing terms and longer repayment times for securities already purchased. This directly benefits Greece, which will remain in the PEPP program until its expiration next March, but the repayments of the securities can be made several months later, keeping the Greek banks liquid.

According to Bloomberg, the European Central Bank is considering whether to change the way reinvested bond markets are reinvested in order to help countries deal with possible future market turmoil, according to knowledgeable officials.

The Governing Council of the ECB, according to Bloomberg, could extend the maturity of securities and give more flexibility to the geographical distribution of these markets under the PEPP program.

However, the same sources who spoke to Bloomberg stated that no decisions have been made yet, while an ECB representative declined to comment.

The move, however, Bloomberg estimates, will allay the concerns of the Governing Council of the ECB as it will be a tool that the ECB can use in the event of market pressures, such as the pandemic period that led to its creation. PEPP.

The change in schedule could be one of the alternatives being considered by the ECB’s Governing Body as it looks to the future following the scheduled end of the emergency purchases in March. Its meeting on December 16 will be a crucial moment in determining the parameters of the bond market.

Expired PEPP bonds are currently scheduled to be reinvested at least until the end of 2023, in accordance with the rules governing the program.

Markets are firmly betting that the ECB will raise interest rates by 10 basis points by December next year.

These changes could be a “consolation” for Greece. Her expectations that she will become eligible for the APP will probably turn out to be in vain, notes Bloomberg.

The exclusion of Greece from the ECB’s regular stimulus tool, the Asset Purchase Program (APP), dates back to its inception. The measure sets minimum levels for credit ratings, which Greece has not yet reached.

In an interview with Bloomberg television in October, Bank of Greece Governor Giannis Stournaras spoke of “very substantial progress” in the economy, noting that Greece’s possible accession to the APP is expected to be discussed by the ECB’s Governing Council.

“Indeed, Greece is not yet in the investment stage, but I am sure that if we did not have the pandemic, Greece would have acquired it,” he noted in the interview.