Goldman on the ECB taper and what it means for bunds

At the end of October, the ECB will outline how it intends to scale down its QE program during 2018. On our baseline projections, net purchases of EMU government bonds will fall from the current pace of around EUR 50bn to an average of EUR 15bn in the second half of 2018. But, thanks to reinvestments, the ECB's presence in secondary markets won't decline by as much, staying close to EUR 20bn per month. Alongside departures from capital key allocations, this should allow the ECB to provide ongoing support to EMU peripheral markets. In core markets, instead, the rise in bond yields reflecting an improving macro outlook will be kept in check via a combination of stronger forward guidance on policy rates, and the persistence of "stock effects" of QE. On balance, we forecast German Bund yields to move into a 0.70-1.1% range over 2018.

26 Sep 2017 - 10:11- Economic Commentary- Source: gs

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