The earliest end date of the ECB’s APP has been pushed back from September 2016 to March 2017 and the central bank is adding municipal bonds to the PSPP, it announced this (Thursday) afternoon, but the amount of monthly purchases being targeted was not increased.

European Central Bank president Mario Draghi announced the measures this afternoon after the ECB announced a 10bp cut in the deposit rate to minus 30bp, with market participants generally deeming the package of moves more dovish than expected. A slightly larger rate cut had been expected by many, as had been not only an extension but an expansion of the asset purchase programme (APP).

The only change that was announced regarding purchases under the APP was the expansion of the public sector purchase programme (PSPP) to include euro-denominated marketable debt instruments issued by regional and local governments located in the euro area. The move had been widely anticipated.

When asked about the extent of purchases of regional bonds, Draghi said that it is too early to comment.

A covered bond analyst said he does not believe the addition of municipal bonds to PSPP will have a substantial impact on purchases under CBPP3.

“You could make the argument that it will bring down the CBPP3 number by giving them more to buy elsewhere, but I think realistically it would only reduce covered bond buying a little, if at all,” he said. “It would only really be the Bundesbank buying regional bonds, and possibly, in small volumes, the French.”

Another analyst agreed the expansion of PSPP is unlikely to have an impact on CBPP3 volumes.

“One reason for the ECB adding municipal bonds to the shopping list could arguably be to provide more leeway for a reduction in covered bond buying, as that would allow them to shift the focus of CBBP3 onto only the primary market,” he said. “But I think more likely is that they just need to give Germany more room to buy public sector bonds while keeping to the capital key.”

When asked what securities might possibly be added to APP at a future date, Draghi noted that while some market participants had said that the ECB would have trouble sourcing bonds, “in fact bonds are there to be bought in good supply”.

Draghi also announced that the ECB will reinvest the principal payments on securities purchased under the APP as they mature, “for as long as necessary”, describing this as a “quite important measure” that would mean that abundant liquidity conditions continue for a “long, long time”. However, observers played down any impact this might have on the ECB’s volumes.

The central bank said that technical details of the new measures will be communicated in due time.

Draghi added that the ECB is going to review some of the technical parameters of the APP programme in the Spring.