The European Central Bank’s (ECB) Asset Purchase Programme (APP) is a key tool in managing the Eurozone economy. For those looking to Buy Eurs or understand the factors influencing the Euro’s value, grasping the intricacies of the APP is essential. This article provides a comprehensive overview of the ECB’s APP, its history, components, and its potential impact on the Euro.
Initially launched in mid-2014, the APP was designed as a non-standard monetary policy measure. It aimed to bolster the monetary policy transmission mechanism and inject the necessary policy accommodation to maintain price stability within the Eurozone. Alongside targeted longer-term refinancing operations, the APP became a cornerstone of the ECB’s strategy to ensure inflation remained in check.
The APP is composed of several distinct programmes:
- Asset-backed securities purchase programme (ABSPP)
- Covered bond purchase programme 3 (CBPP3)
- Corporate sector purchase programme (CSPP)
- Public sector purchase programme (PSPP)
Following the ECB’s monetary policy strategy review concluded in July 2021, the Governing Council reaffirmed policy rates as the primary instrument. However, recognizing the limitations of policy rates at the lower bound, the ECB acknowledged the importance of other tools, including forward guidance, asset purchases, and longer-term refinancing operations. This solidified asset purchase programmes as a permanent part of the ECB’s toolkit to steer monetary policy and ensure inflation stabilizes at the 2% target over the medium term. For individuals considering to buy eurs, understanding these tools is crucial as they directly influence the economic landscape of the Eurozone.
Over time, the ECB has actively managed the APP, adjusting the pace of purchases and reinvestments to respond to evolving economic conditions. A significant recent decision was made on June 15, 2023, when the Governing Council announced the discontinuation of reinvestments under the APP starting in July 2023. Currently, the APP portfolio is set to decrease as assets mature, unless the Governing Council decides to reactivate this instrument to guide monetary policy in the future.
The Evolution of APP Net Purchases
Since October 2014, the Eurosystem has been actively purchasing securities through the APP. The scale of these net purchases has been recalibrated multiple times, reflecting the changing economic climate and the ECB’s policy adjustments. Here’s a chronological overview:
- March 2015 – March 2016: €60 billion monthly net purchases
- April 2016 – March 2017: €80 billion monthly net purchases
- April 2017 – December 2017: €60 billion monthly net purchases
- January 2018 – September 2018: €30 billion monthly net purchases
- October 2018 – December 2018: €15 billion monthly net purchases
- January 2019 – October 2019: Reinvestments of redemptions only, no net purchases
- November 2019 – March 2022: €20 billion monthly net purchases (with a temporary €120 billion increase from March to December 2020)
- April 2022: €40 billion net purchases
- May 2022: €30 billion net purchases
- June 2022: €20 billion net purchases
- July 2022 – February 2023: Full reinvestments of redemptions, no net purchases
- March 2023 – June 2023: Partial reinvestments of redemptions, no net purchases
- July 2023 onwards: No reinvestments of redemptions
This detailed history of purchase adjustments highlights the dynamic nature of the APP and the ECB’s responsiveness to economic shifts. For those looking to buy eurs, monitoring these adjustments can provide insights into potential future movements in the Euro’s value.
Chart: Net asset purchases by programme under APP
Source: ECBNotes: The average monthly APP targets were first set by the ECB’s Governing Council at the start of the PSPP in March 2015. The additional envelope of €120 billion decided by the Governing Council on 12 March 2020 has been linearised for illustration in this chart, while it will be implemented in full according to the established principles with additional flexibility.
The ECB’s Governing Council decided on June 9, 2022, to halt net asset purchases under the APP from July 1, 2022. However, reinvestments of principal payments from maturing securities purchased under the APP continued in full until February 2023. On December 15, 2022, a decision was made to gradually reduce the APP portfolio from March 2023 onwards, with the Eurosystem only partially reinvesting principal payments. This reduction initially amounted to an average of €15 billion per month until the end of the second quarter of 2023. The complete cessation of reinvestments was confirmed on June 15, 2023, effective from July 2023.
The following table provides a snapshot of Eurosystem holdings and changes within the APP:
Eurosystem holdings under the asset purchase programme
| Changes of holdings (previous month) | ABSPP | CBPP3 | CSPP | PSPP | APP |
|---|---|---|---|---|---|
| Holdings* in December 2024 | 7,047 | 253,009 | 288,377 | 2,124,731 | 2,673,164 |
| Monthly net purchases | -1,218 | -4,335 | -3,326 | -13,814 | -22,694 |
| Quarter-end amortisation adjustment and redemptions of coupon STRIPS | 0 | 0 | 0 | 0 | 0 |
| Holdings* in January 2025 | 5,829 | 248,674 | 285,050 | 2,110,917 | 2,650,470 |
| *At amortised cost, in EUR millions, at month-end. Figures may not add up due to rounding. Figures are preliminary and may be subject to revision. |
Amortisation adjustments, reflecting accounting principles for securities purchased above or below face value, are applied at the end of each quarter. STRIPS accounting is managed monthly. Weekly changes are regularly updated in the Eurosystem weekly financial statement. For detailed historical data, refer to the Statistics section on daily liquidity conditions.
APP cumulative net purchases, by programme
By the end of January 2025, the total stock of Eurosystem APP bonds reached €2861 billion. The chart below illustrates the cumulative net purchases since the programme’s inception.
APP Redemptions and Reinvestments
During the APP’s reinvestment phase, the Eurosystem aimed to maintain market neutrality through a flexible and smooth implementation. Notably, for corporate bond reinvestments from October 2022, the Eurosystem prioritized issuers demonstrating stronger climate performance, reflecting a growing focus on sustainability.
Further emphasizing this shift, on February 2, 2023, the Governing Council decided to intensify the focus on climate performance during the partial reinvestment phase for corporate bonds. To ensure market stability, the reinvestment of principal redemptions was strategically distributed over time.
The table below provides estimated monthly redemption amounts for the APP over a 24-month period, offering a forward-looking perspective for those monitoring Eurozone financial dynamics and considering to buy eurs.
Expected monthly redemption amounts for the APP over a rolling 24-month horizon (in EUR millions)*
| EUR millions | ABSPP | CBPP3 | CSPP | PSPP | APP |
|---|---|---|---|---|---|
| Aug 24 | 243 | 541 | 244 | 10,533 | 11,561 |
| Sep 24 | 354 | 2,993 | 4,738 | 17,505 | 25,590 |
| Oct 24 | 431 | 736 | 2,613 | 30,578 | 34,358 |
| Nov 24 | 230 | 3,136 | 2,031 | 21,298 | 26,695 |
| Dec 24 | 344 | 1,790 | 1,944 | 15,643 | *19,721** |
| Jan 25 | 1,268 | 4,335 | 2,973 | 13,463 | 22,039 |
| Feb 25 | 214 | 8,635 | 3,788 | 24,021 | 36,658 |
| Mar 25 | 293 | 3,709 | 4,279 | 33,379 | 41,660 |
| Apr 25 | 346 | 3,373 | 5,137 | 26,671 | 35,527 |
| May 25 | 158 | 4,448 | 2,699 | 20,541 | 27,846 |
| Jun 25 | 225 | 3,864 | 2,940 | 18,261 | 25,290 |
| Jul 25 | 166 | 1,135 | 2,156 | 26,161 | 29,618 |
| Aug 25 | 166 | 468 | 562 | 13,114 | 14,310 |
| Sep 25 | 277 | 6,492 | 5,259 | 12,568 | 24,596 |
| Oct 25 | 307 | 1,864 | 1,005 | 37,073 | 40,249 |
| Nov 25 | 271 | 2,106 | 2,008 | 20,060 | 24,445 |
| Dec 25 | 147 | 1,903 | 1,693 | 8,274 | 12,017 |
| Jan 26 | 268 | 4,740 | 4,212 | 8,318 | 17,538 |
| Feb 26 | 304 | 3,911 | 2,926 | 35,650 | 42,791 |
| Mar 26 | 170 | 1,575 | 5,946 | 25,077 | 32,768 |
| Apr 26 | 87 | 3,685 | 4,673 | 42,520 | 50,965 |
| May 26 | 57 | 1,003 | 7,111 | 21,748 | 29,919 |
| Jun 26 | 138 | 2,317 | 4,937 | 17,964 | 25,356 |
| Jul 26 | 81 | 1,554 | 1,467 | 24,590 | 27,692 |
Actual redemption, based on month-end data. ECB estimates in italics. Figures may not add up due to rounding. Figures are preliminary and may be subject to revision. Notes: Realised redemptions may differ from estimated redemptions. As of 3 September 2024, monthly redemptions will be published at an annual frequency. To preserve the current level of information, the redemption horizon will be extended to 24 months.*
Corporate Sector Purchase Programme (CSPP)
The Eurosystem’s net purchases of corporate sector bonds under the CSPP occurred between June 8, 2016, and December 19, 2018. Following this period, only reinvestments were made until purchases restarted from November 2019 to June 2022. Reinvestments continued until February 2023, followed by a period of partial reinvestments until the complete discontinuation in July 2023.
Reflecting a commitment to environmental goals, the Eurosystem has been actively working to decarbonise its corporate bond holdings, aligning with the Paris Agreement. This is implemented by tilting purchases towards issuers with better climate performance during reinvestments.
To support market liquidity, securities held under the CSPP that meet minimum credit quality requirements are available for securities lending.
CSPP holdings*
| EUR mil. | 282,148 |
|---|---|
| Date | 21 February 2025 |
| * End of week, at amortised cost |
Historical lists of securities held under the CSPP are available for review, offering transparency into the programme’s holdings.
Public Sector Purchase Programme (PSPP)
Net purchases under the Public Sector Purchase Programme (PSPP) were conducted from March 9, 2015, to December 19, 2018. Similar to other programmes, reinvestments followed until purchases were restarted from November 2019 to June 2022. Full reinvestments then occurred until February 2023, transitioning to partial reinvestments until the program ended reinvestments in July 2023.
The PSPP encompasses:
- Nominal and inflation-linked central government bonds
- Bonds from recognized agencies, regional and local governments, international organizations, and multilateral development banks within the Euro area.
Government bonds and recognized agencies constitute approximately 90% of the PSPP portfolio, with international organizations and multilateral development banks making up the remaining 10%. Like the CSPP, PSPP securities are also available for securities lending to enhance market liquidity.
PSPP holdings*
| EUR millions | 2,089,679 |
|---|---|
| Date | 21 February 2025 |
| * End of week, at amortised cost |
Breakdown of debt securities under the PSPP
| (EUR millions) | Cumulative net purchases as of end December 2024* | Monthly net purchases January 2025 | Cumulative net purchases as of January 2025* | WAM of PSPP portfolio holdings end December 2024** | Current WAM of PSPP portfolio holdings** | WAM of eligible universe of securities under the PSPP as at end-January 2025** |
|---|---|---|---|---|---|---|
| Austria | 64,331 | 0 | 64,331 | 7.03 | 6.95 | 8.57 |
| Belgium | 83,722 | 0 | 83,722 | 6.33 | 6.24 | 10.55 |
| Cyprus | 3,665 | 0 | 3,665 | 8.25 | 8.17 | 8.80 |
| Germany | 541,690 | -4,498 | 537,193 | 6.57 | 6.54 | 8.23 |
| Estonia | 605 | 0 | 605 | 5.95 | 5.86 | 6.76 |
| Spain | 274,164 | -6,719 | 267,445 | 7.07 | 7.18 | 8.19 |
| Finland | 39,027 | 0 | 39,027 | 7.39 | 7.30 | 8.85 |
| France | 457,953 | -252 | 457,701 | 5.99 | 5.91 | 8.63 |
| Ireland | 38,981 | 0 | 38,981 | 7.45 | 7.37 | 9.76 |
| Italy | 357,786 | -2,221 | 355,565 | 7.11 | 7.07 | 7.95 |
| Lithuania | 5,215 | 0 | 5,215 | 9.53 | 9.44 | 8.99 |
| Luxembourg | 3,566 | 0 | 3,566 | 5.00 | 4.92 | 7.84 |
| Latvia | 3,452 | -25 | 3,426 | 7.93 | 7.90 | 7.30 |
| Malta | 1,388 | 0 | 1,388 | 9.50 | 9.42 | 7.76 |
| Netherlands | 114,654 | -98 | 114,556 | 7.21 | 7.13 | 9.90 |
| Portugal | 49,546 | 0 | 49,546 | 6.78 | 6.69 | 8.54 |
| Slovenia | 10,687 | 0 | 10,687 | 7.96 | 7.88 | 9.20 |
| Slovakia | 16,251 | 0 | 16,251 | 7.34 | 7.26 | 8.62 |
| Supranationals | 242,594 | 0 | 242,594 | 8.05 | 7.96 | 9.89 |
| Total | 2,309,278 | -13,814 | 2,295,465 | 6.86 | 6.82 | 8.63 |
* Cumulative monthly net purchases figures represent the difference between the acquisition cost of all purchase operations and the redeemed nominal amounts. ** Remaining weighted average maturity (WAM) in years. Notes: Figures may not add up due to rounding. Figures are preliminary and may be subject to revision. The monthly purchase volumes are reported on a settlement basis and net of redemptions. The Eurosystem will continue to adhere to the principle of market neutrality via smooth and flexible implementation. To this end, the reinvestment of principal redemptions will be distributed over the year to allow for a regular and balanced market presence (see press release on technical parameters for the reinvestment). When assessing the remaining WAM of Eurosystem holdings relative to a market measure, deviations could reflect, inter alia, the 1 to 30 year maturity range of purchases; the issue share limits taking into account holdings in other Eurosystem portfolios; as well as the availability and liquidity conditions in the market during the implementation period; and the impact of portfolio redemptions and their respective reinvestments.
Asset-Backed Securities Purchase Programme (ABSPP)
The Asset-Backed Securities Purchase Programme (ABSPP) saw net purchases from November 21, 2014, to December 19, 2018. Reinvestments followed until purchases resumed from November 2019 to June 2022, with subsequent reinvestments until February 2023 and partial reinvestments until July 2023, when all reinvestments ceased.
ABSPP holdings*
| EUR mil. | 5,679 |
|---|---|
| Date | 21 February 2025 |
| * End of week, at amortised cost |
Covered Bond Purchase Programme 3 (CBPP3)
Covered bond purchases under the third Covered Bond Purchase Programme (CBPP3) took place from October 20, 2014, to December 19, 2018. Reinvestment phases mirrored the ABSPP, with a final cessation of reinvestments in July 2023. Securities acquired under CBPP3 are also available for securities lending by Eurosystem central banks.
CBPP3 holdings*
| EUR mil. | 242,913 |
|---|---|
| Date | 21 February 2025 |
| * End of week, at amortised cost |
Terminated Programmes: Historical Context
Securities Markets Programme (SMP)
Launched on May 10, 2010, the Securities Markets Programme (SMP) aimed to alleviate severe market tensions that were disrupting monetary policy transmission. Following the introduction of Outright Monetary Transactions (OMT) on September 6, 2012, the SMP was terminated. Securities acquired under SMP are held until maturity. Liquidity provided through SMP was sterilized through weekly liquidity-absorbing operations until June 2014.
SMP holdings*
| EUR mil. | 1,336 |
|---|---|
| Date | 21 February 2025 |
| * at amortised cost |
Total Eurosystem SMP holdings by issuer as at 31 December 2024
| Issuer country | Nominal amount (EUR billions) | Book value* (EUR billions) | Average remaining maturity (years) |
|---|---|---|---|
| Ireland | 0.6 | 0.6 | 0.2 |
| Greece | 0.7 | 0.7 | 1.5 |
| Total** | 1.4 | 1.3 | 0.9 |
* SMP holdings are valued at amortised cost. ** Totals may not add up due to rounding.
Covered Bond Purchase Programme (CBPP1) and Covered Bond Purchase Programme 2 (CBPP2)
The first Covered Bond Purchase Programme (CBPP1) was launched on July 2, 2009, and concluded on June 30, 2010, reaching €60 billion. The second Covered Bond Purchase Programme (CBPP2) followed in November 2011, ending on October 31, 2012, at €16.4 billion. Both CBPP1 and CBPP2 assets are held until maturity.
Conclusion: APP and the Euro
The ECB’s Asset Purchase Programme is a complex but crucial element of Eurozone monetary policy. Understanding its various components, historical phases, and current status is vital for anyone interested in the Eurozone economy and, by extension, for those considering to buy eurs. While the APP’s direct impact on exchange rates is multifaceted and influenced by numerous global factors, it undeniably plays a significant role in shaping the economic environment that affects the Euro’s value. By monitoring ECB policy and programmes like the APP, individuals can gain a more informed perspective on the factors influencing the Euro.
