The European Central Bank's purchases of German bonds have reached a point where pulling back will not cause a strong reaction in long-term rates, executive board member Benoit Coeure said.
"Once the 'crossover point' has been passed, additional purchases become less necessary to contain the term premium at low levels," said Coeure in prepared comments for delivery at the U.S. Monetary Policy Forum in New York on Feb. 23. He was referring to the premium investors require to hold assets for a longer period of time.
The ECB is still purchasing assets, though the monthly amount has been trimmed to €30 billion. The program is expected to run through September and possibly beyond.
Coeure's comments appeared to broadly endorse market expectations that the central bank may be considering ending the program by year's end.
"With the current share of the Bund free float constituting only a small fraction of the total outstanding, we can be confident that we have passed this threshold in the euro area, in particular as current and future reinvestments will ensure that the amount of duration risk to be borne by price-sensitive private investors will increase only very moderately over time," Coeure said.
"This means that, in the future, the Eurosystem can retreat as buyer in the market without risking an unwarranted decompression of the term premium," he added.