The European Central Bank (ECB) is being forced to re-evaluate how it can continue buying €80bn worth of eurozone sovereign bonds per month when there are less and less on the market with any yield. Any changes to the massive bond buying program is likely to have a significant effect on eurozone bond exchange-traded funds.

The European Central Bank meets on 8 September 2016 to consider changes to its quantitative easing program.

The ECB has bought €1tn worth of bonds as of 1 September 2016 and has surpassed the half-way mark of quantitative easing (QE), a program which started 18 months ago to kick-start the flagging eurozone economy. The institution is now reportedly struggling to find the bonds it needs to ward off deflation and lift investor confidence.

Fixed income securities have been popular with investors thus far this year – globally, ETF investors have piled in more than $81bn to fixed income ETFs this year to 8 August, compared to $52.5bn for equity ETFs over the same period, as shown by Deutsche Bank data.

As investor demand has surged, prices have risen and yields have fallen – a good sign for fixed income ETFs. The Vanguard EUR Eurozone Government Bond UCITS ETF (LSE: VETY), which launched in February, is up 2.6% in the last three months. In Sterling terms it is up more than 9%.

As part of QE, the ECB is currently buying €18bn worth of German Bunds per month, which has also boosted ETFs tracking this market. The db x-trackers II iBoxx Germany UCITS ETF 1C (XETRA: XBTR), which holds around 40% in bonds with a one to five-year expiry, is up 6.5% year to date in euro terms.

Germany’s 10-year bund yield has fallen to below zero for the first time in history, prompting Citibank analysts to say that the entire German sovereign market could be off limits for the ECB by November, as it must buy bonds that yield over 0.4%, as reported by the Financial Times. That rule of 0.4% could change in the coming months, however.

Andrew Bosomworth, PIMCO’s head of portfolio management in Germany, estimated the ECB would taper back its bund purchases, which would most likely benefit France, Spain and Italy as the ECB would buy their bonds instead. The iShares France Government Bond UCITS ETF (LSE: SFRB), the iShares Spain Government Bond UCITS ETF (LSE: SESP) and the iShares Italy Government Bond UCITS ETF (LSE: SITB) are up year to date by 7.3%, 6.7% and 4.5% in respectively in euro terms.

More direction for these ETFs will likely be given at the ECB meeting on 12 December – given ECB action is unlikely at the next meeting on 9 September – where policymakers will discuss how to revamp QE in order to battle a headline inflation average of 0% in the face of a 2017 target of 1.3%.

Bosomworth said the ECB would be unlikely to extend QE past March 2017, by which point QE will account for at least 17% of eurozone GDP, as the continual buying of bonds could distort the yield curve and potentially cause financial instability.

He said that the ECB might instead relax the capital key allocation – in other words, buy a bigger amount of debt from each country – which would lead to “tighter spreads between periphery and German government bonds, tighter corporate spreads and steeper core-country yield curves.”