The Eurosystem's asset purchase programmes

The Eurosystem's asset purchase programme (APP) consists of four asset purchase programmes:

• the third covered bond purchase programme (CBPP3, since 20 October 2014), for the purchase of covered bank bonds;
• the asset-backed securities purchase programme (ABSPP, since 21 November 2014), for the purchase of securities issued following the securitization of bank loans;
• the public sector purchase programme (PSPP, since 9 March 2015), for the purchase of bonds issued by governments, recognized agencies and international organizations located in the euro area;
• the corporate sector purchase programme (CSPP, since 8 June 2016), for the purchase of bonds and commercial paper issued by non-financial corporations located in euro-area countries.

The APP has direct effects on the yields of public and private sector securities. This has a direct effect on the economy, since a downward shift in market yields improves credit supply conditions and stimulates investment. The additional liquidity spurs investors to rebalance their portfolios towards assets yielding higher returns, i.e. those not directly covered under the central banks' interventions, thereby transmitting the monetary stimulus to the various private sector financing instruments. Finally, lower interest rates favour the depreciation of the exchange rate, providing a further boost to economic activity.

The purchase programmes (conducted with monetary policy counterparties or with other counterparties that NCBs trade with for investment purposes) are implemented in accordance with the principles of decentralization and specialization. They are subject to a number of regimes for sharing risks that are mitigated by criteria that partly coincide with those envisaged for the assets pledged as collateral for Eurosystem refinancing operations (see Collateral management).

Under the third covered bond purchase programme (CBPP3), the Bank of Italy purchases securities on the primary or secondary markets, in an amount determined by the ECB and weighted by national market shares. Purchases made under the CBPP3 adhere to the principle of risk sharing among the Eurosystem central banks based on their capital key (the percentage share in the ECB's total subscribed capital).

The asset-backed securities purchase programme (ABSPP), initially launched by outsourcing trading activities to external asset management companies, has now been wholly internalized. On 1 April 2017 the Bank of Italy took on the role of asset manager for Italian securities on the primary and secondary markets. Purchases made under the ABSPP adhere to the principle of risk sharing among the Eurosystem central banks based on their capital key.

Under the PSPP, the Bank of Italy will buy Italian public sector securities on the secondary market and bear all the risk. For ECB purchases of government securities, both Italian and of other euro-area countries, and for purchases of securities issued by European supranational entities, which together account for 20 per cent of the total PSPP, the principle applies of risk-sharing between Eurosystem national central banks according to their capital key.

Under the corporate sector purchase programme (CSPP) the Bank of Italy is one of the six national central banks tasked with purchasing securities issued by private non-bank corporations incorporated in the euro area and this includes commercial paper of sufficient credit quality. The purchases adhere to the principle of risk sharing among the Eurosystem central banks based on their capital key.

APP net asset purchases started in March 2015 and were temporarily interrupted at the end of 2018. Starting from January 2019, APP purchases have been made only with the aim of reinvesting the principal payments of maturing securities bought under the programme.

In September 2019 the Governing Council decided to restart net purchases under the APP at a monthly pace of €20 billion as from 1 November for as long as necessary to reinforce the accommodative impact of ECB policy rates.

In March 2020 the spread of the coronavirus (Covid-19) led to a significant worsening of the prospects for economic growth globally and in the euro area. In response to the heightened uncertainty, the Governing Council announced a comprehensive package of monetary policy measures, with the aim of guaranteeing favourable conditions to fund the real economy. In this context, the net asset purchases under way (€20 billion each month) have been flanked by a temporary additional endowment of €120 billion for further securities purchases until the end of the year.

In an extraordinary meeting, the Governing Council has also decided to launch, starting from 26 March 2020, a new temporary programme, known as the Pandemic Emergency Purchase Programme (PEPP), with the aim of combating the serious and growing risks to the monetary policy transmission mechanism and the outlook for growth posed by the spread of the coronavirus (Covid-19). Initially the PEPP envisaged additional purchases of public and private sector securities for a total of €750 billion until the end of the critical phase of the emergency, and in any case not before the end of 2020. Two months later, in June 2020, the PEPP envelope was increased by €600 billion to a total of €1,350 billion, and the horizon for net purchases was extended to at least the end of June 2021.

In December 2020, as part of a broad recalibration of monetary policy instruments aimed at preserving favourable financing conditions throughout the crisis and countering the marked and prolonged repercussions of the pandemic for the outlook for growth and inflation, the PEPP envelope was further increased by €500 billion to a total of €1,850 billion. The horizon of net asset purchases and the reinvestment period were extended at least until the end of March 2022 and the end of December 2023 respectively.

In December 2021, given the progress in the economic recovery and the improving inflation outlook, the Governing Council announced the end of net purchases of securities under the PEPP at the end of March 2022. At the same time, the reinvestment horizon for the PEPP was extended until at least the end of 2024. In order to ensure a gradual reduction in overall net purchases, the Council had also decided to raise the monthly purchases under the APP to €40 billion in the second quarter of 2022 and to €30 billion in the third quarter of 2022. From October 2022 onwards, the Governing Council would have maintained net asset purchases under the APP at a monthly pace of €20 billion for as long as necessary to reinforce the accommodative impact of its policy rates.

In March 2022, however, based on its updated assessment of the inflation and growth outlook and taking into account the uncertain environment sparked by the Russian invasion of Ukraine, the Governing Council revised the purchase schedule for its APP for the following months. Monthly net purchases under the APP are set to €40 billion in April, €30 billion in May and €20 billion in June. The calibration of net purchases for the third quarter will be data-dependent and will reflect its evolving assessment of the outlook.

In June 2022, amid intensified inflation pressures, the Governing Council decided to end net asset purchases under the APP as of 1 July 2022.

In July 2022, the Governing Council approved a new monetary policy tool named the Transmission Protection Instrument (TPI). The new tool ensures that the monetary policy stance is transmitted smoothly across all euro area countries.

In December 2022, the Governing Council announced the start of the process for reducing the Eurosystem's monetary policy securities holdings: from March to June 2023, the APP portfolio declined at a measured and predictable pace through partial reinvestment of the principal payments from maturing securities; in July 2023 reinvestments under the APP were entirely discontinued.

In December 2023, the Governing Council announced the start of the process for reducing PEPP holdings as well: over the second half of 2024, PEPP portfolio will decline owing to partial reinvestment of the principal payments from maturing securities; reinvestments under the PEPP are intended to be discontinued at the end of 2024.

For further details see The Eurosystem's asset purchase programme on this website.

Between May 2010 and September 2012, following tensions on the government bond markets in several euro-area countries, the Eurosystem conducted a purchase programme in the secondary market of public and private sector debt securities issued in the area (the securities markets programme, SMP). The objective was to ensure depth and liquidity in the market segments experiencing acute tensions and to repair the monetary policy transmission mechanism. In order not to inject additional liquidity into the banking system, the purchases were fully sterilized (until June 2014) through fixed term deposit transactions conducted weekly.

SMP purchases ended following the announcement by the ECB of outright monetary transactions (OMT).

In addition to CBPP3, the Eurosystem conducted two other covered bank bond purchase programmes: the CBPP1, between July 2009 and June 2010, and the CBPP2, between November 2011 and 2012.