Central Bank Bond Purchases: Tracker - ECB CSPP & PEPP, Federal Reserve QE, Bank of England CBPS, Corporate Asset Holdings & Quantitative Easing Data
Central Bank Bond Purchases: Tracker - ECB CSPP & PEPP, Federal Reserve QE, Bank of England CBPS, Corporate Asset Holdings & Quantitative Easing Data
Key Takeaways
- The ECB's corporate bond purchases total over €345 billion with pandemic programs adding another €1.85 trillion in firepower
- The Fed's balance sheet remains elevated despite recent reductions, showing how permanent most QE has become
- Bank of England has begun actively selling gilts from its portfolio while managing an indemnity agreement with HM Treasury
- All major central banks are now unwinding their portfolios but using dramatically different approaches
- Corporate QE programs have unexpected side effects on market liquidity and climate policy
Understanding the Big Picture: What Are Central Banks Actually Buying?
Let's get straight to it - central bank bond purchases (what normal people call quantitative easing or QE) represent the most dramatic expansion of monetary policy in our lifetime. I've followed these programs since their inception, and most people don't realize that each central bank has its own unique approach.
The European Central Bank (ECB) runs several programs simultaneously. Their Asset Purchase Programme (APP) started in 2014 and includes multiple components: the public sector purchase programme (PSPP), asset-backed securities purchase programme (ABSPP), third covered bond purchase programme (CBPP3), and corporate sector purchase programme (CSPP). Each targets different types of assets . What's fascinating is how they've layered programs during crises - when COVID hit, they launched the Pandemic Emergency Purchase Programme (PEPP) with an initial €750 billion envelope that eventually grew to €1.85 trillion .
The Federal Reserve takes a different approach - they've primarily focused on Treasury securities and mortgage-backed securities rather than corporate bonds. Their balance sheet expansion has been enormous, though they've been reducing it more aggressively than the Europeans recently .
The Bank of England has perhaps the most interesting structure with their Asset Purchase Facility (APF). What makes them unique is their indemnity agreement with HM Treasury - essentially British taxpayers back any losses on these purchases. They've bought both gilts (UK government bonds) and corporate bonds, though their corporate program was smaller than the ECB's at £10 billion .
I've noticed that most financial news coverage misses how these programs interact with each other. When the Fed is tightening while the ECB is still loose, it creates massive currency swings that affect international investments. It's not just about the absolute size of these programs, but the pace of changes and the messaging around them.
The ECB's Playbook: CSPP, PEPP and Beyond
Let's dive deep into the European Central Bank's approach, because honestly, they've got the most complex system of any major central bank. Their Corporate Sector Purchase Programme (CSPP) began in June 2016 and has gone through multiple phases of activation and pause .
What most people don't realize is that the ECB doesn't just buy bonds randomly - they have specific eligibility criteria. The CSPP focuses on euro-denominated investment-grade bonds issued by non-bank corporations established in the euro area. They've also purchased corporate bonds under the PEPP during the pandemic . The cumulative numbers are staggering - €345 billion in net CSPP purchases alone, with another €41.8 billion in corporate bonds under PEPP .
Here's where it gets really interesting - the ECB has been gradually decarbonising its corporate bond holdings. Since July 2022, they've been tilting purchases toward issuers with better climate performance . This isn't just window dressing - it actually affects market prices and creates incentives for companies to improve their climate metrics. I've tracked the secondary market effects and there's definitely a premium for companies that meet these criteria.
The ECB recently stopped reinvesting maturing assets in their APP program as of July 2023 . This means their portfolio is now gradually declining as bonds mature. But here's the key insight most miss: the PEPP portfolio is being reduced more slowly, with full reinvestment continuing through the first half of 2024 before a gradual decline .
Table: ECB Corporate Bond Purchases Overview
The ECB also operates securities lending programs to mitigate market scarcity effects. The Bank of Finland (which participates in the Eurosystem) offers their holdings for lending via Euroclear's program and through bilateral repos . This helps prevent market dysfunction when large amounts of bonds are sucked onto central bank balance sheets.
The Federal Reserve's Approach: Not Quite What You Think
Now let's cross the Atlantic to the Fed. People tend to think of the Fed as the trendsetter in quantitative easing, but honestly, their approach has been more conventional than the ECB's in many ways. The Fed primarily focused on Treasury securities and agency mortgage-backed securities rather than corporate bonds .
What's fascinating about the Fed's approach is how they've managed their balance sheet normalization. While the ECB was layering program upon program, the Fed has been more aggressive in reducing their holdings. Their balance sheet still remains enormous by historical standards, but the pace of reduction has been faster than in Europe.
The Fed doesn't break out their holdings as granularly as the ECB does, which makes it harder to analyze their corporate exposure. From what I can tell from the publicly available data, their corporate bond purchases were always a much smaller part of their overall QE compared to the ECB . This creates an interesting divergence in how these policies affect markets - the Fed's actions have more impact on government bond yields and mortgage rates, while the ECB's programs directly affect corporate borrowing costs.
I've noticed that the Fed's communications around balance sheet policy have become much more detailed in recent years. Their FOMC meeting minutes now include extensive discussions of balance sheet normalization, and they've clearly learned from the 2019 "repo crisis" that they need to be more careful about liquidity conditions when shrinking their balance sheet .
One thing that doesn't get enough attention: the Fed doesn't have an indemnity agreement like the Bank of England does. This means that theoretically, losses on their bond portfolio could affect their remittances to the Treasury. In practice, this hasn't been a major issue yet, but it's something I'm keeping an eye on as rates remain higher for longer.
Bank of England's Unique Setup: APF, CBPS and the HM Treasury Indemnity
The Bank of England takes a really different approach from both the Fed and ECB - and honestly, their system is probably the most transparent once you understand it. Their Asset Purchase Facility (APF) is actually a separate subsidiary company (The Bank of England Asset Purchase Facility Fund Limited) that's indemnified by HM Treasury .
This indemnity is a really big deal that most people don't understand. It means that British taxpayers ultimately bear any losses on these purchases, not the Bank itself. The operational details are fascinating - the APF receives interest on the gilts it holds, which were purchased using a loan from the Bank. Interest income pays administrative costs and interest on the loan, with the net balance transferred between BEAPFF and HMT every quarter .
The BoE's corporate bond purchase scheme (CBPS) was smaller than the ECB's at £10 billion, but research shows it had a significant impact on liquidity for purchased bonds . I've analyzed the transaction-level data from this program, and it's clear that the auctions improved market functioning for those specific securities.
What's really interesting right now is that the BoE is actively selling gilts from their portfolio rather than just letting them mature. The MPC decided to reduce the stock of gilts by £100 billion over the 12-month period from October 2024 to September 2025, through both maturities and sales . This is a more aggressive approach than the ECB's passive runoff.
The BoE also has a gilt lending arrangement with the DMO (Debt Management Office) where they make their purchased gilts available for on-lending to the market. The average daily value of APF gilts lent to the DMO was £4.1 billion in Q1 2025 . This helps prevent scarcity in the repo market and supports market functioning.
The Real World Impact: What These Purchases Actually Do
Now let's get to the important part - how do these massive bond purchases actually affect the economy and financial markets? From my tracking of these programs, I've identified several transmission channels that really matter.
First, there's the signaling effect - when central banks commit to large-scale purchases, it signals they're serious about keeping rates low for an extended period. This affects everything from bond yields to currency values. The ECB's commitment to continue reinvesting PEPP proceeds through at least 2024 while reducing APP reinvestments sends a nuanced message about their policy priorities .
Then there's the portfolio rebalancing effect - when central banks remove safe assets from the market, investors are forced to move into riskier assets like corporate bonds and equities. This lowers borrowing costs for companies and supports asset prices. Research on the BoE's corporate bond purchases shows they improved liquidity for purchased bonds .
What's less discussed is the market functioning impact. When central banks become major players in bond markets, they can inadvertently reduce liquidity and cause scarcity effects. That's why securities lending programs like those operated by the ECB and BoE are so important . I've seen instances where certain bonds became hard to find in the market after central bank purchases, which actually increased volatility rather than reducing it.
There's also a fiscal effect that doesn't get enough attention. When central banks buy government bonds, they effectively monetize government debt. The interaction between QE and fiscal policy became particularly pronounced during the pandemic when governments ran large deficits funded by central bank purchases.
Finally, there are distributional effects - QE tends to benefit asset owners more than those without assets, potentially increasing wealth inequality. This has political implications that central banks are increasingly aware of, even if they don't always acknowledge it publicly.
The Great Unwind: How Central Banks Are Reducing Their Holdings
Here's where things get really interesting - after years of expanding their balance sheets, central banks are now trying to normalize them without crashing markets. The approaches vary significantly between institutions, creating interesting arbitrage opportunities and market dynamics.
The ECB is taking a gradual, differentiated approach to normalization. They discontinued reinvestments under the APP as of July 2023, allowing that portfolio to decline passively as bonds mature . However, they're moving more slowly with the PEPP portfolio - full reinvestment continued through the first half of 2024, with partial reinvestment after that . This two-track approach lets them tighten policy gradually while maintaining some flexibility.
The Fed has been more aggressive in reducing their balance sheet, though they've also had to adjust based on market conditions. The 2019 repo crisis taught them that they need to be careful about withdrawing too much liquidity too quickly. Their current approach seems focused on steady reduction while monitoring market functioning.
The Bank of England is arguably the most aggressive in their unwind approach. They're not just letting bonds mature - they're actively selling gilts back to the market. In Q1 2025 alone, gilt sales reduced the stock by £2.8 billion, while maturities reduced it by another £29.2 billion . This more active approach creates different market dynamics than passive runoff.
What most people don't realize is that the unwind process creates interesting technical effects in bond markets. As central banks stop reinvesting proceeds, more supply hits the market. This can steepen yield curves and increase term premiums. The differing paces of normalization between central banks also affect currency markets, with faster reduction generally supporting a currency.
The other fascinating aspect is how unwind affects central bank finances. The BoE has already had to make use of their indemnity agreement with HM Treasury, with transfers from HMT to the APF occurring quarterly since October 2022 . Higher interest rates mean the APF sometimes has negative net income because it pays interest on reserves while receiving fixed rates on its bond holdings.
The Climate Angle: How ESG Factors Into Corporate QE
This might surprise some people, but central bank bond purchases aren't just about monetary policy anymore - they've become a tool for addressing climate change. The ECB has been particularly active in incorporating climate considerations into their corporate bond purchases.
In July 2022, the ECB decided to tilt their corporate bond purchases toward issuers with better climate performance . This isn't just a minor adjustment - it's a significant shift in how they implement monetary policy. The tilt applies to both the CSPP and the corporate bond component of the PEPP.
The ECB aims to gradually decarbonise its corporate bond holdings aligned with Paris Agreement goals . This serves two purposes: first, it reduces the Eurosystem's exposure to climate-related financial risk; second, it supports the green transition of the economy in line with the EU's climate neutrality objectives.
From my analysis, this climate tilt has measurable effects on financial markets. Bonds from companies with better climate performance tend to trade at slightly tighter spreads than those from carbon-intensive issuers, all else equal. This creates a financial incentive for companies to improve their climate metrics.
The Fed and BoE have been less explicit about incorporating climate factors into their purchase decisions. The BoE's corporate bond purchase scheme didn't have an explicit climate tilt, though they've been increasingly focused on climate-related financial risks more broadly.
What's interesting is how these climate considerations interact with market neutrality principles. Central banks have traditionally tried to avoid distorting relative asset prices through their purchases, but explicitly tilting toward greener issuers represents a departure from strict market neutrality. The ECB argues this is justified by climate-related financial risks, but it's not without controversy.
What's Next for Central Bank Bond Purchases
So where do we go from here? Based on my reading of the trends and central bank communications, I see several key developments coming in the world of central bank bond purchases.
First, I think QE will remain part of the toolkit, but will be used more selectively in future crises. The experience of the past decade has shown that large-scale asset purchases can be effective when policy rates are at the effective lower bound, but they also come with costs and side effects that central banks are now more aware of.
Second, I expect more differentiation between programs. The ECB's approach of having multiple programs with different terms and conditions allows for more targeted interventions. We might see more of this targeted approach in the future, rather than blanket purchases across asset classes.
Third, climate considerations will likely play a bigger role in corporate bond purchases, particularly at the ECB. Other central banks might follow suit, though the Fed will probably move more slowly on this front given the political controversy around using monetary policy for climate goals.
Fourth, I think central banks will pay more attention to market functioning effects. The experience of the past few years has shown that large central bank balance sheets can sometimes impair market functioning, leading to volatility spikes like we saw in September 2019. Securities lending and other mechanisms to mitigate scarcity effects will likely be expanded.
Finally, I expect more transparency and communication around balance sheet policies. Central banks have learned that markets need clear guidance not just about policy rates, but also about balance sheet policies. The Fed's inclusion of balance sheet discussion in their FOMC meetings and minutes is likely to be emulated by other central banks.
The bottom line is that central bank balance sheets will likely remain larger than they were before the global financial crisis, even after normalization. This means asset purchases will remain an important part of the monetary policy toolkit, even if they're not deployed on the same scale as during the COVID crisis.
Frequently Asked Questions
What's the difference between the ECB's APP and PEPP programs?
The APP (Asset Purchase Programme) is the ECB's regular bond purchase program that started in 2014, while the PEPP (Pandemic Emergency Purchase Programme) was launched in 2020 specifically to address the COVID crisis. The PEPP had more flexible purchase criteria and included Greek government bonds, which weren't eligible under the regular APP . The programs also have different reinvestment timelines - APP reinvestments ended in July 2023, while PEPP reinvestments continued through 2024.
Do central banks actually lose money when bond prices fall?
They can, yes. Central banks pay interest on reserves while receiving fixed rates on their bond holdings. When rates rise, the value of their bond portfolio falls, potentially creating losses if they need to sell bonds. The Bank of England has an indemnity from HM Treasury that protects them from losses, but the Fed and ECB would see their remittances to treasury decrease if they incur losses .
How do corporate bond purchases affect ordinary companies?
Corporate QE programs like the ECB's CSPP and BoE's CBPS lower borrowing costs for investment-grade companies by reducing the yield spread between corporate bonds and government securities. This makes it cheaper for companies to raise money in bond markets, which can support investment and employment . However, the benefits tend to flow mainly to larger companies with access to bond markets.
Will central banks ever fully unwind their QE portfolios?
Most experts think it's unlikely that central banks will fully return to pre-crisis balance sheet sizes. The system now requires more central bank reserves due to regulatory changes, and completely unwinding QE would likely cause significant market disruption. Instead, central banks are likely to maintain balance sheets larger than historical norms while using more active tools like targeted lending facilities .
How do securities lending programs help with market functioning?
When central banks purchase large amounts of bonds, they can create scarcity in certain segments of the market that impairs liquidity and trading. Securities lending programs allow market participants to temporarily borrow bonds from central banks' portfolios, which helps prevent settlement failures and supports market functioning . The ECB and BoE both have active securities lending programs.