Greece Macro Monitor (30 June 2016)
Greece’s prospective inclusion in ECB’s QE programme
Potential timing, purchasing volumes & market impact
This note looks at the potential timing, size and market impact of central bank purchases of Greek government and government guaranteed securities in the context of the present quantitative easing programme. Our analysis suggests that the inclusion of Greek marketable debt in the aforementioned programme could take place before year-end, provided that the ECB Governing Council makes a positive assessment of the progress made in the analysis and reinforcement of the sustainability of Greek public debt and assuming no major delays in the completion of the 2nd programme review. The latter condition is particularly relevant if no PSPP purchases of Greek debt take place before the initiation of formal discussions in the context of that review (expected in early October). Total central bank purchases of Greek debt could reach a maximum of c. €4.2bn, with a potential to increase them to €5bn or more if the present QE programme were to be extended beyond March 2017. This could be equivalent to well over a year worth of the present total daily trading volume in Greek government securities, having a pronounced impact on risk premia and contributing to a GGB yield spread compression of more 100bps, in our view.
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