Summary

• The asset purchases are a bit more than yesterday’s leak.
• Most of risk (78%) stays on national central bank balance sheets.
• Negative yielding securities can be bought.

There are six key elements to the ECB’s announcement:

1. Starting in March the ECB will buy 60 bln euros a month in national bonds and agency bonds. The amounts will be driven by the capital key which corresponds roughly to the size of the economies. That means that Germany, France and Italy will be the largest buyers.

2. The risk will remain largely with the national central banks, but the risk of agency purchases will be shared collectively. Agency bonds will amount to 12% of the assets being purchased. The ECB argues that by controlling all the design features and coordinating the purchases, it has safeguarded the singleness of the Eurosystems’s monetary policy. Market participants may disagree.

3. The program will run through September 2016, but ECB clearly keeps door open: the purchases will in any case be conducted until we see a sustained adjustment in the path of inflation.

4. The asset purchased will be investment grade, but some additional eligibility criteria will be applied in the case of countries under an EU/IMF adjustment program. This is subtle but important. As long as Greece, Cyprus and Portugal are on some program their bonds can be bought. This is also a subtle indication that the old Troika no longer exists. This is part of the signal from the European Court of Justice preliminary ruling and also the signals from the new EC.

5. Although the ECB did not cut its official rates, it did remove the 10 bp premium over the main repo rate (MRO) for the new TLTRO facility.

6. There is an issuer limit of 33%. This is why Draghi has indicated that Greek bonds could be bought after SMP redemption, which means after July.

Additional operational details will be available later today.

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