Skip to main content

ECB Pledges 'Significant' Increase in Bond Purchases; U.S. Yields Fall

A pledge to boost the pace of monthly QE purchases by the ECB has put further downward pressure on U.S. Treasury yields, and another boost for Wall Street.

The European Central Bank pledged to 'significantly' increase the pace of its monthly asset purchases Thursday in order to stem the tide of rising bond yields amid a sputtering economic recovery, putting further downward pressure on U.S. Treasuries. 

The size of the ECB's pandemic emergency purchase programme (PEPP) will remain unchanged at €1.85 trillion ($2.2 trillion) until at least the end of March 2022, the bank said Thursday in a statement that included no changes to its benchmark lending rates, but added that "based on a joint assessment of financing conditions and the inflation outlook ... purchases under the PEPP over the next quarter to be conducted at a significantly higher pace than during the first months of this year."

"The Governing Council will purchase flexibly according to market conditions and with a view to preventing a tightening of financing conditions that is inconsistent with countering the downward impact of the pandemic on the projected path of inflation," the ECB said. "In addition, the flexibility of purchases over time, across asset classes and among jurisdictions will continue to support the smooth transmission of monetary policy."

The move for further ECB support, which includes myriad liquidity boosts for the region's banking sector and record low interest rates of near zero percent, should provide further downward pressure for bond yields in Europe and, by extension, the United States, as investors look to higher U.S. yields in order to add value to their fixed income portfolios.

Benchmark 10-year U.S. Treasury bond yields, which slipped under the 1.5% mark in overnight trading, were last seen at 1.485% in the wake of the ECB decision, adding upward support for pre-market trading on Wall Street.

Ten-year German bund yields, meanwhile, slumped further into negative territory, to -0.362%.

Futures contracts tied to the Dow Jones Industrial Average extended gains, indicating a 115 point opening bell gain, while those linked to the tech-focused Nasdaq Composite now suggest a 245 point move to the upside.