ECB to soak up almost entire EGB net supply in 2020

Highlights:

• Euro area government bond issuance activity has progressed in line with the historical pattern in 2019. The remaining net funding needs for the rest of the year are very manageable.
• Due to marginally higher redemptions and net issuance, the gross issuance is expected to increase slightly in 2020.
• Even without net purchases in 2019, the ECB still holds almost 25% of all outstanding euro area government bonds.
• With the restart of its purchase programme this share will increase again close to 26% by 2020. The central bank will absorb almost the complete net issuance next year.
• As the ECB holds already more than € 500bn of German debt, a possible scarcity of German Bunds is expected to come to the fore again over the course of 2020. However, given the limited size of the forthcoming QE programme, the self-imposed issue limit of 33% will be binding not earlier than the middle of 2021.

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