- The ECB signalled in its last GC meeting that it will continue to conduct significant purchases of eurozone government bonds during the whole of next year
- However, as the ECB will lower its purchase rate and as it is will skew its purchases to private sector assets, the eurozone sovereign bond market will be less supported than before
- In the meantime, mostly due to the ongoing cyclical recovery, borrowing needs of eurozone governments are improving
- We calculate that after adjusting for ECB gross purchases, the net adjusted supply of the 8 largest eurozone issuers will end up at EUR 3bn in 2018
- This amount is still very modest by historical standards but compares to negative net adjusted supply of almost EUR 300bn in 2017
- On a country level, differences persist with the ECB’s gross purchases amplifying the supply drain in supercore (German and Dutch) bond markets
- The French bond market will grow despite the ECB’s gross purchases so that the French supply picture is the least favourable of the largest eurozone issuers
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