Weekly Market Outlook

ECB Buys Record Amount of Debt as QE Frontloaded Before Holidays

The European Central Bank bought a record monthly amount of assets under its quantitative-easing program in November in an attempt to frontload purchases before market liquidity may dry up during the holiday season.

The ECB bought a total of 85.4 billion euros ($91.6 billion) of debt last month even as the pace of purchases of government bonds, which represent the bulk of the program, dropped to 70.1 billion euros from 73 billion euro in October, ECB data published on Monday showed. An increase in monthly buying of covered bonds, asset-backed securities and corporate debt helped to make up for the difference.

Policy makers will decide on Thursday whether to extend QE past the provisional end-date of March as they strive to reach their inflation goal. Economists in a Bloomberg survey foresee purchases continuing for around a further six months, most likely at 80 billion euros a month, an extension that may require easing some of the ECB’s self-imposed rules.

While officials have said they’ll buy public debt in proportion to the capital key — roughly equivalent to the relative size of each euro-area economy — they also claim the flexibility to temporarily deviate from that rule to respond to market conditions.

The central bank said last month it intends to frontload purchases from Nov. 29 to Dec. 21 “to take advantage of the relatively better market conditions,” before pausing the program from Dec. 22-30.