Euro area sovereign debt issuance vs. ECB purchase dynamics look favourable in 2021. On the supply side, net issuance should decrease vs 2020, thanks to lower aggregated numbers of budget deficits, incoming support from EU funds, and for some countries, the use of increased cash accounts and higher bond redemptions.
On the demand side, following December PEPP increase ECB potential purchases look more than adequate to cover for new debt and to provide as well a cushion for eventual additional funding needs.
In this paper, we focus on the technical factors that are likely to dominate supply-demand dynamics for European Government Bonds (EGB) this year and which are set to continue driving Eurozone fixed income markets.
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