The European Central Bank will likely drain cash from the banking system to offset any bond purchases made to cap borrowing costs for indebted euro zone states, two sources told Reuters.
This would allow the ECB to ‘sterilise’ the bond purchases under the new scheme, in a repeat of its weekly “liquidity-absorbing” operations of a decade ago. These offered banks an interest rate up to that of the ECB’s refinancing operation, then 0.25%.
The full article is available at https://www.reuters.com/markets/rates-bonds/ecb-drain-cash-offset-new-yield-capping-scheme-sources-2022-06-28/