FRANKFURT (Reuters) - The European Central Bank is considering giving itself extra wiggle room when rolling over its holdings of government debt next year to ensure it always finds bonds to buy when the old ones mature, two sources close to the matter told Reuters.
Earlier on Thursday, the ECB confirmed plans to stop adding to its 2 trillion euro ($2.27 trillion) sovereign debt stash at year-end as it sees inflation recovering, but it reaffirmed a pledge to reinvest cash from expiring bonds for a long time.
This won’t be easy as not every issue that matures is immediately replaced by new supply from the same country — particularly in Germany, where the government runs a budget surplus and the ECB bought many short-term bonds.
For this reason, ECB policymakers want to give themselves more than the current three months to reinvest the proceeds from maturing bonds, the sources said.
One added the issue was now being studied by the central bank’s staff. ECB President Mario Draghi said a decision on reinvestment would be announced at the central bank’s December 13 meeting.
An ECB spokesperson declined to comment.
Currently, the ECB and the euro zone’s 19 national central banks, which carry out the bulk of the Public Sector Purchase Programme, have up to three months to recycle cash repaid as bonds mature back into the same jurisdiction.
When redemptions have been large, this has resulted in deviations from the ECB’s capital key, which dictates that government bonds should be bought in proportion to how much capital each national central bank has paid into ECB coffers.
In one notable instance, massive redemptions of German debt in April resulted in the ECB purchasing more paper from Spain, Italy and France that month to plug the gap, only to make up for it in May.
According to Allianz estimates, around 165 billion euros of government bonds bought as part of the PSPP are due to mature next year, 30 percent of which are in Germany, 20 percent in France and just over 15 percent in Italy.
($1 = 0.8797 euros)
Reporting by Francesco Canepa, Frank Siebelt and Balazs Koranyi; Editing by Catherine Evans