Why Central Banks Are Buying Government Bonds Again

In this episode, Lucas and Luna explore the quiet resurgence of bond purchases by central banks in 2026. After years of quantitative tightening, several major central banks—including the Bank of Japan and the European Central Bank—have resumed net buying of government bonds. Lucas explains the mechanics: these are not crisis-level QE programs but smaller, steady purchases aimed at managing yield curve control and providing liquidity. Luna brings up the Bank of Japan's recent shift to yield curve control 2.0, where they buy bonds to cap the ten-year yield at 1.5%. They discuss the Federal Reserve's passive approach versus active purchases elsewhere, and what this means for inflation expectations and bond market functioning. Specific data point: the ECB's Pandemic Emergency Purchase Programme reinvestments ended in 2024, but new net purchases under the Transmission Protection Instrument have reached €60 billion in 2026. The episode also covers how these purchases affect bank reserves and money markets. A must-listen for anyone trying to understand why the era of central bank balance sheet expansion isn't over. #CentralBanks #BondBuying #QuantitativeEasing #YieldCurveControl #BankOfJapan #EuropeanCentralBank #FederalReserve #MonetaryPolicy #GovernmentBonds #Liquidity #Inflation #MoneyMarkets #TPI #Economics #FexingoBusiness #BusinessPodcast #LucasAndLuna #Macro Keep every episode free: buymeacoffee.com/fexingo