Mario Draghi has clearly said that the ECB's QE programme will include bonds, that are already trading in negative territory when it comes to yields. However, a Bundesbank official has recently stated this still needs to be clarified and in line with this some argue that it is counterintuitive that the ECB's QE programme will include bonds with negative yields, as it would generate a loss for the national central banks.
First, buying at negative yields does not mean the ECB generates a loss. In fact with the deposit rate at -20bp this is set to be a money machine. Even the German Bundesbank should earn a positive return on the purchases, although German government bonds yield negative out to 6Y.
When the ECB heads into the QE programme roughly 18% of the bonds eligible for purchases yield negative. The share is even larger in some countries and is expected to increase when the ECB enters the market.
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