European Central Bank (ECB) President Draghi is likely to note stronger euro-area survey data at Wednesday’s post-meeting press conference. But ongoing negative headline CPI and weak core inflation (down to 0.6% y/y in March) justifies the ECB’s sovereign bond purchase programme, now in its second month. By 10 April, the ECB had settled EUR 61.7bn of purchases of mainly sovereign bonds, as well as EUR 67.2bn of covered bond purchases and EUR 5.3bn of asset-backed securities (ABS). But with some EUR 270bn of euro-area 2Y-30Y government bonds trading with yields less than -20bps, including 40% of German Bunds, Draghi will likely be questioned on how the ECB would respond to a shortage of eligible bonds.
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