from Zero Hedge
With the monthly ECB governing council meeting and press conference due on Thursday morning, many market participants have turned their attention to a major problem we flagged nearly two years ago which has re-emerged as a result of the global collapse in yields: Mario Draghi may run out of eligible German debt to buy as soon as a few months from now, which has prompted speculation of what the ECB can do to address this issue.
As UBS’ Nishay Patel writes, market participants have questioned whether the ECB will be able to source enough German bonds to help meet the monthly target of €80bn of asset purchases due to the eligibility criteria applied on bond purchases. “Under the current rules, we estimate the Eurosystem may hit holding limits of German debt within the next 6 months. In all likelihood this could prompt the ECB to change the eligibility criteria on asset purchases.“