What is Behind the Increase in Non-Monetary Policy Securities of the Eurosystem?

The Eurosystem has completely stopped reinvestments in maturing bonds from its purchase programmes at the end of 2024, leading to an acceleration in the decline in the stock of securities which it held for monetary policy purposes. By contrast, the stock of securities, which are held for non-monetary policy purposes, shows an increasing trend since early 2023. A closer look into this item shows that among the Eurosystem member NCBs the Banque de France accounted for the major part of this increase, followed by the Bank of Greece.

Securities held for monetary and non-monetary policy purposes (weekly data).

Other securities by holding member central bank (monthly data).

Figure 1: Securities held for monetary policy purposes and other securities in the Eurosystem balance sheet in tn EUR. Source: ECB-ILM. Notes: 4F = ECB.

The evolution of the balance sheet of the Banque de France shows that since the beginning of 2023 about half of the decrease in the stock of monetary policy-related securities has been compensated by an increase in the stock of other securities. The composition of securities by financial instrument shows that securities held by the BdF consisted mainly of debt securities, with equity instruments playing a negligible role.

Securities held by the Banque de France (monthly data).

Securities held by the Banque de France by instrument (quarterly data).

Figure 2: Securities held by the Banque de France in tn EUR. Source: ECB-ILM, ECB-QSA.

The main counterpart for debt securities held by the BdF has been the French government sector, although with a declining trend in outstanding amount. If we take a look on the main EA-resident holders of debt securities issued by the French government, Eurosystem member central banks still hold the largest amount of these securities, with the BdF as the main creditor. In contrast to the Eurosystem, banks from the Euro area have increased their holdings of French government bonds with the turn in monetary policy in the second half of 2022. The residual between the market value of total outstanding debt securities of the French government sector and the amount held by EA resident holders shows that non-EA residents (e.g. US MMFs¹) have also increasingly invested into French government bonds in recent years.

Outstanding amount of debt securities held by the Banque de France by counterpart sector (quarterly data).

Total outstanding amount of debt securities issued by french government sector (monthly data) and EA-resident holder sectors (quarterly data).

Figure 3: Stocks of debt securities held by the Banque de France and outstanding stocks of debt securities issued by the French government sector in tn EUR. Source: ECB-SHSS, ECB-CSEC.

The data shows that stocks of securities in the BdF’s portfolio are trending slightly downwards for all debtor sectors. At the same time, the data for the creditor sectors of French government debt securities in combination with the evolution of debt securities held by the BdF indicate that the BdF has compensated for some of the maturing bonds in its monetary portfolio through purchases in its non-monetary portfolio. These purchases on the secondary market are likely to have a dampening effect on interest rates, which is relevant in view of the projections of high budget deficits of the French government.

Footnotes

1. OFFICE OF FINANCIAL RESEARCH.