benoit cœure : embarking on public sector asset purchases speech by mr benoit cœure, member of the executive board of the european central bank, at the second international conference on sovereign bond markets, frankfurt am main, 10 march 2015. * * * i would like to thank marie hoerova, peter hoffmann and andreas moser for their contribution to the speech. i remain solely responsible for the opinions expressed herein. summary on 9 march the eurosystem launched its public sector purchase programme ( pspp ). on that day the ecb and the national central banks of the euro area purchased €3. 2 billon of public sector bonds, putting the programme on track to reach a total of €60 billion in march. monetary policy is implemented in normal times in money markets. stepping into bond markets creates challenges and might have unintended consequences. one key principle underlying the implementation of the pspp is the minimisation of unintended consequences, which can be ensured by obeying the concept of market neutrality. we do want to affect market prices but we will not suppress the price discovery mechanism. the eurosystem will ensure a high degree of transparency around its interventions and will closely monitor their impact on market liquidity and collateral availability. some market reports have suggested that we may not be able to buy the intended amounts of government bonds. while the effective supply of eligible securities is undoubtedly lower than the total amount outstanding, it will still be substantially higher than the amounts we intend to purchase. if this is the case, there will be a price at which we can buy the quantities needed to meet our monthly targets. in other words, we may face a scarcity of bonds, but we won ’ t face a shortage. and there are good reasons to expect that scarcity will materialise first and foremost in those market segments with a higher duration, potentially helping to maximise the economic impact of our operations. * * * ladies and gentlemen, it is a great pleasure for me to speak to you tonight. as you all know, the eurosystem launched its public sector purchase programme ( pspp ) yesterday, 9 march. on that day the ecb and the national central banks of the euro area purchased €3. 2 billon of public sector bonds, putting the programme on track to reach a total of €60 billion of public and private sector bonds in march, as intended by the governing council. the pspp is the latest of a suite of asset purchase programmes (

. and these investors are generally felt to have more flexible mandates. so, while the effective supply of eligible securities is undoubtedly lower than the total amount outstanding, i do believe that it will still be substantially higher than the amounts we intend to purchase. if this is the case, there will be a price at which we can buy the quantities needed to meet our monthly targets. in other words, we may face a scarcity of bonds, but we won ’ t face a shortage. scarcity is a fact and not a problem per se. allocating scarce resources through prices is the way our economies work. and in the light of the factors i have just listed, there may be good reasons to expect that scarcity will materialise first and foremost in those market segments with a higher duration, potentially helping to maximise the economic impact of our operations, as outlined in the section on transmission mechanism. 3. minimising the unintended consequences as outlined in the introduction, one key principle underlying the implementation of the pspp is the minimisation of unintended consequences. this can be ensured by obeying the concept of market neutrality of our operations. see the “ esrb report on the regulatory treatment of sovereign exposures ”, march 2015. fitch ratings ( 2014 ), protecting eurozone banks from the sovereigns, 17 november. see also barwell, r. ( 2015 ), “ two birds with one stone : sourcing qe bonds and solving the sovereign bank nexus ”, der querdenker, rbs research, 27 february. bis central bankers ’ speeches by this we do not imply that we do not want to have any impact on the market. monetary policy decisions always and everywhere have an impact on market prices. i have already mentioned the potential channels through which the programme might have an impact, and we have already seen a substantial decline in interest rates following our january announcement. in fact, interest rates had already fallen substantially prior to the january announcement, and previous experiences with qe suggest that they will continue to do so in the coming months. 10 the concept of market neutrality means that, while we do want to affect prices, we do not want to suppress the price discovery mechanism. we will operationalise this principle by ensuring a high degree of transparency around our interventions and by closely monitoring their impact on liquidity and collateral availability. transparency transparency plays a crucial role in the successful implementation of the pspp. it has been a key element in other jurisdictions where large - scale