Macro-financial risk
2026-04-26
11 minute read
15 sources
ECB Quantitative Tightening 2026: BTP Bund Spreads, Fiscal Compliance, and the Eurozone Absorption Test
The ECB has cut the deposit facility rate from a 4.00 percent peak in September 2023 to 2.50 percent by March 2025, while running off APP and PEPP balance sheets in parallel. With Italy and France inside the new EU fiscal framework and EUR 700 billion of net long end issuance to be absorbed in 2026, fragmentation risk is priced in BTP Bund basis rather than in TPI activation.
On June 6 2024 the ECB delivered the first 25 basis point rate cut after the September 2023 4.00 percent deposit facility peak, and by March 2025 the deposit facility stood at 2.50 percent under Lagarde's data dependent framing. The Asset Purchase Programme has been in full passive runoff since July 2023, rolling off near EUR 30 billion p...