European Central Bank Launches Extraordinary $820 Billion 'Pandemic' QE Program

The ECB will buy billions more in government, corporate and agency bonds in what it's calling a Pandemic Asset Purchase Program.

The European Central Bank said Wednesday that it will launch an extraordinary bond purchase program worth €750 billion in order to help insulate the region's economy from the likely coronavirus-lead recession. 

The Pandemic Asset Purchase Program, as the ECB has named it, was announced following an emergency teleconference chaired by President Christie Lagarde, who assured investors there were "no limits" to the central bank's ability to deliver its price stability mandate nor it commitment to the single currency. 

The new bond buying program, which will run until at least the end of the year and will not include 'capital key' conditions that limit the ECB's ability to buy certain amounts of member state's bonds, came just hours after Largarde reportedly told European leaders that lockdowns and travel restrictions could shrink the regional economy by around 5% this year.

"The Governing Council of the ECB is committed to playing its role in supporting all citizens of the euro area through this extremely challenging time," the bank said. "To that end, the ECB will ensure that all sectors of the economy can benefit from supportive financing conditions that enable them to absorb this shock. This applies equally to families, firms, banks and governments."

"The Governing Council will do everything necessary within its mandate. The Governing Council is fully prepared to increase the size of its asset purchase programmes and adjust their composition, by as much as necessary and for as long as needed," the statement added. "It will explore all options and all contingencies to support the economy through this shock."

The euro was marked 0.4% higher against the U.S. dollar following news of the new quantitative easing program to change hands at 1.0952.

U.S. equity futures also rallied on the news, with contracts tied to the Dow Jones Industrial Average rising to indicate a 450 point opening bell gain on Thursday, while those linked to the S&P 500 suggest a 41 point advance. 

Last week, the ECB defied market forecasts when it made no changes to its three key interest rates but pledged instead to re-open its dormant quantitative easing program to support the economy as it grapples with the coronavirus pandemic.

The ECB said it will offer a "temporary envelope" of asset purchases, up to €120 billion, and added to target lending programs, known as TLTROS, that rewards regional banks for lending cash into the real economy. It also gave banks extra wiggle room on capital buffers they have been fortifying since the global financial crisis, freeing-up more cash for struggling lenders.