Estimates of the increase are about €500 billion and anything less than that might disappoint investors. The PEPP started with €750 billion in March and a further €600 billion was added in June. Some analysts are forecasting a total expansion of another €1 trillion, though probably not all at once. At this week’s meeting, the expectation is that the program will be extended through next year and perhaps into 2022 from its current expiration in mid-2021.
ECB buying has pushed Italian bond yields to record lows. The benchmark 10-year bond settled at about 0.57% Monday.
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Because Italy’s bonds still have positive yield and the ECB is supporting prices, the spread to Germany’s bonds has narrowed and analysts forecast it to narrow further.
German bonds are yielding well into negative territory. Perceived as the standard for Europe, they move more often in tandem with US Treasuries. The 10-year Treasury note yield is trending upward as Congress gets closer to agreement on a new stimulus package approaching $1 trillion, creating more debt and requiring more bond issuance, which depresses prices. Bond yields move inversely to prices.
As German bond yields rise in sympathy with Treasury yields and ECB buying and investor demand puts downward
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