Draghi in QE quandary after draining bond market

London

THE biggest buyer of European government bonds may have to start spreading its money around a bit more widely. The European Central Bank (ECB) expanded the size of its debt-buying programme in April by a third to 80 billion euros (S$123 billion) a month and appears to be running out of securities eligible under its own rules.

Monetary policymakers increased purchases of Irish and Portuguese bonds last month by less than it did for German debt, suggesting demand already threatens to outstrip supply from some countries. Banks say it might have to include more bonds or risk diluting the stimulus to the economy the quantitative easing is designed to inject. "Everything is on the table," said Richard McGuire, head of rates strategy at Rabobank International. "Whenever they meet resistance, they get around it by adjusting the rules, adjusting the limits or targeting new asset classes."