The European Central Bank (ECB) currently has a €4.6trn balance sheet and €1.9trn in excess liquidity following the quantitative easing (QE) that it began in March 2015, writes Pieter Jansen, senior strategist - multi-asset at NN Investment Partners.
It is soon to start normalising its balance sheet, probably in 2021-22 and finishing between 2023 and 2026. So what are the implications for the eurozone's bond market over the coming years? We anticipate two potential scenarios. In the first, there will be a gradual normalisation of the stock of bonds the ECB will have bought between 2022 and 2026, occurring in a positive growth and inflation environment. In the second, normalisation will happen more aggressively between 2021 and 2023. M&G's Isaacs: Why would the ECB run the risk of tightening? The first scenario will have the...
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