When the ECB announced that it would broaden the scope of its asset purchases on 22 January, it came as a surprise that bonds issued by European agencies and supranational issuers were included. However, uncertainty still remains about the definition of the eligible SSA universe, particularly regarding the eligibility criteria for agencies. Using the ECB's categorisation within its collateral framework, we estimate the volume of eligible SSA debt at around EUR750bn.
According to our estimates, the stock of supranational debt in particular is limited relative to the ECB's ambitions and we expect its holdings of supranational debt to approach the 25% issue cap by September 2016. Overall, we expect the ECB's purchases to have a substantial impact in the SSA market, with supranational debt being the key beneficiary. Moreover, we expect debt issued by agencies recognised as such under the ECB's collateral framework to continue its outperformance.
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