BY disappointing bond investors this month, Mario Draghi has bought himself some time on quantitative easing.

    The selloff since the European Central Bank (ECB) president failed to signal an extension of the bond-buying plan Sept. 8 has reduced the proportion of German sovereign debt yielding less than the institution’s deposit rate to 60 percent, from about two thirds in late August. Since the ECB is prohibited from buying securities below this threshold, the prospect of it running out of bonds to purchase has receded, data compiled by Bloomberg show.

    The need for a tweak to QE has therefore become less urgent, said Vincent Chaigneau, London-based global head of rates and foreign-exchange strategy at Societe Generale SA.

    When the euro region’s central banks are able to buy more shorter-dated bonds, because their yields are no longer below the ECB’s minus 0.4 percent deposit rate, then there’s less pressure for officials to purchase longer-term securities.

    This helped shorter debt outperform last week, steepening the German two- to 30-year so-called yield curve.

    “It’s a nice side effect that yields are going up and it’s getting easier for the ECB to get all the bonds it needs, but it wasn’t their intention to talk yields up,” said Rene Albrecht, a rates and derivatives analyst at DZ Bank AG in Frankfurt. “Beyond a three-month horizon, yields should be biased for moving higher.”

    The two- to 30-year yield spread widened to as much as 132 basis points, or 1.32 percentage points, last week, the most since the June 24 Brexit announcement.

    Where bonds, and markets generally, go will be largely down to the Federal Reservemeetings and Bank of Japan — particularly with the ECB’s next policy decision not due until Oct. 20.

    (SD-Agencies)