ECB is set to quantitatively displace EGB investors

The non-domestic international investors outside the euro area are most likely to be the primary source of net sellers of EGBs to the ECB; at least in the earlier stages of the programme.
 
Against this, euro area-based investors, whether banks or other asset managers, at best, are likely to rebalance their portfolios within the EGB universe (ie, move further down the credit scale and/or move higher along the maturity spectrum), as a result of QE, rather than becoming a significant net source of EGB sellers to the ECB early on. 

Barclays notes in a report as follows on Monday:
 

• In our view ECB's QE of around €45bn per month of EGB purchases over at least 19 months is a very large number for the EGB market to absorb. We believe that accumulating such a large volume, while not inconceivable, will be challenging for the ECB.
  
  
• We think the ECB may well have to bid bonds aggressively to procure them from their holders, in particular to avoid question marks around the credibility of its QE delivery. 
  
  
• This, in our view, means that outright core EGB yields will remain suppressed and that the portfolio squeeze effect of ECB purchases on outright core EGB rates and the yield curve will dominate the reflationary effects in the near term.
   
• We also expect the core periphery spreads of Italy and Spain versus Germany to grind tighter in this environment, with 15y remaining our preferred point.